KLCI Update

We are near the end of 2009. The stock market has rallied from its March low and it has retraced more than 60% of it down swing from a high of 1521 to a low of 801.

The technical picture is indicating weakness ahead. The MACD indicator has made a bearish crossover. +DI is still above the –DI but it looks to be turning towards the –DI. ADX is also decreasing which shows a weakness in the current uptrend. Stochastic indicator is also showing a bearish stance.

The market needs more positive news to push it higher. Any retracement should be well supported at 1157.

Dow Update

Dow Jones Industrial Average closed at 9712 on Friday down 249 points. The moved erased all the gains made on Thursday. The index closed below the uptrend channel and is at dangerous territory. The RSI is now at 45 level. Note that RSI has not fall below 40 level since Jul 09. MACD is showing bearish signal as well with the indicator below its signal line. -DI is set to cross the +DI, this may mark the beginning of the correction that the market has been expecting for some time now.

The next few trading days will be crucial. If the index is able to close within the
uptrend channel, it will be good for the bulls. If the index is not able to gather enough
momentum, then the correction looks set to test the low of 9378 set on 2 Oct 09.

KLCI Update

KLCI manages to keep above its up trend support line last week. This is a positive sign.

The MACD indicator is still above its signal line, indicating that the Bulls are still in control.

However a danger sign is appearing on the RSI chart. The indicator is showing a slight divergence from the price chart with the index making a newer high whereas RSI is trending downwards.

All eyes will be on whether the index is able to maintain above its up trend line. If this line is violated, coupled with a diverging RSI, it will mean a sell down is in the cards.

Trade with care.