STOCK MARKET OUTLOOK (For May 04, 2011): BE CAREFUL OF THIS NOTORIOUSLY WEAK MONTH OF MAY. CAUTION AND TIGHTEN STOP LOSS IS SUGGESTED.
On Monday’s close the KLCI was down by 3.48 points or 0.23% at 1531.47 on slightly lower volume of 1 billion shares traded. Decliners led advancers by 519 to 255 with 262 stocks unchanged.
1. The KLCI continued to drift downwards.
2. That is not a good sign as volume rose, suggesting that selling has increased.
3. For this market to stay bullish, IT MUST NOT FALL FURTHER, otherwise the moving averages are going to turn south and along goes investors confidence.
4. Moreover May has historically been a notoriously bad month for stocks and this did not go un-noticed by U.S. and European investors. Yahoo Finance was quoted as having said, “Surveys of 56 leading investment houses in the United States, Europe ex-UK, Japan and Britain showed exposure to stocks falling to 51.3 percent in the month from 52.6 percent in March.”
5. Noted Yahoo Finance, “Interviews with poll participants suggested a degree of concern has grown about the impact of a rising oil price on growth that may also be peaking." We're moving into seasonally weak conditions (for equities) with May and June here, and the macro story may be at risk if oil prices shoot to $130 per barrel or so. There are too many things that can go wrong," said Keith Wirtz, chief investment officer at U.S. firm Fifth Third Asset Management.
6. Many of our stocks which we called a “buy” a week or more ago have been declining since.
7. Stocks like Ramunia, Ramunia-Wa, Kbunai, Coastal, Cuscapi PMetal for example, which had a brief one day flutter on April 22, is now slumping back to its April 22 level.
8. This failed rally is worrying. If they fall further, we would consider cutting losses.
9. For Ramunia, the sell-stop is 0.63 or lower. For Ramunia-Wa, it is 0.41 or lower.
10. For PMetal it is a sell at 2.51 OL. For KBUNAI, it is a sell at 0.20 OL.
11. Having said that, there may still be a chance of a rebound, if there is no further selling today.
12. Stocks-to-watch for today are: GUANCHG, RHBCAP, AIRASIA, CUSCAPI.
13. News of Osama bin Laden’s killing drove the U.S dollar higher on Monday and triggered a sell-down on gold and crude oil appears to be temporary as the trend is bent on continuing with U.S dollar loving lower, and oil and gold higher.
14. As long as the Federal Reserve does not bite the bullet and raise interest rates to combat inflation and their burgeoning trade deficit of $1.5 trillion, the dollar will weaken further.
15. Investors should think of shifting out to world commodities to take advantage of this weak US dollar!
16. The ringgit weakened a little to 2.9730 from 2.9610.
17. We are not long because 1541 is not exceeded. We only re-enter above 1541.
CONCLUSION: The local index continues to languish in lacklustre trade yesterday. While the Dow
remains firm, Malaysian stocks drifted lower and the current political situation in Malaysia isn’t helping to shore up confidence amongst whatever is left of foreign investors keen on Malaysia. Our view therefore remains unchanged – i.e. we would stay out until the KLCI can rally above 1541 OH.
Upside Targets: 1550(hit)/1584/1652/1681/1760-64 (Revised targets on 5/1/11)
Immediate downside targets: 1473/1431/1410 (Revised on 11/2/11
Ichimoku chart: Span A SUPPORT: 1509 (Revised on 15/4/11)