STOCK MARKET OUTLOOK (For Nov 02, 2010): WHILE RIDING THIS BULL WE MUST BEWARE OF THE BEAR!
On Monday’s close the KLCI was up by 4.00 points or 0.27% at 1509.66 on higher volume of 1.27 billion shares traded. Decliners led advancers by 440 to 344 with 316 stocks unchanged.
1. U.S. stocks rose sharply Monday after reports showed growth in manufacturing activity accelerated in both the U.S. and China last month. The market was also getting a lift ahead of midterm elections and the Federal Reserve's meeting this week where the central bank is expected to announce a new economic stimulus program. The Dow Jones industrial average rose about 50 points in late morning trading. (Source: Yahoo Finance).
2. With expectations that the Dow can rebound to close at its year’s high last night, our KLCI should see further rebounds today.
3. As at yesterday’s close, the KLCI is edging closer to test its highest close of 1516.22 registered on 11/1/2008.
4. But what is not a welcome sign is that there were more decliners than gainers in yesterday’s activity. This is called “negative market breadth” and should deserve some caution as you try to make some money from the stock market!
5. When a market has negative market breadth, its rally is not running on two legs but one leg, hence it could be unsustainable. As such we should be cautious and sell on any sharp decline. While riding this bull we need to beware of the bear.
6. Still, we expect the KLCI to test its 2.618 times wave 1 target of 1534 before correcting.
7. At this level, the KLCI is at its second highest close EVER. The highest close was at 1516.22
clocked on 11/1/2008. The highest high registered by our KLCI was at 1524.69 on
14/1/2008.
8. We have never been so high (in terms of the main KLCI index) in our nation’s history. Not in 1994, not in 1997, not in 2000 nor in 2004. It was only in 2008 that saw our KLCI closed at 1516.22 – its highest close ever and yesterday we are just a hair’s breathe away from this record high!
9. At yesterday’s close of 1509.66, we are clocking at its second highest close ever. But we are cautious because the strong volume was clocked with more losers than gainers suggesting selling volume.
10. We need to see positive market breadth today accompanied by a rise in the index if this
market is to remain technically strong.
11. Not all stocks are being played up. Mostly it is the index linked and selective stocks from the finance, property, oil and gas and GLCs are being played up.
12. This weakness is very obvious as can be seen from the higher number of losers than gainers.
13. Stock picking is therefore the key to making money in this stock market bull run!
14. Our stocks to watch that are likely to run today are: DNP, GAB, GUANCHG, AFFIN*, AFG, AMMB, OSK*, RHBCAP*, APM, DRBHCOM, HWGB, GUOCO*, IJMLAND, INCHKEN, L&G*, SUNRISE,TEBRAU, DAYA, AFFIN-CA, AIRASIA-CF, IJMLAND-WA.
15. New stock is KFC.
16. GUOCO – take profit at target 1.48.
17. We like L&G, TEBRAU, AFFIN, RHBCAP, OSK, GUOCO.
18. Please check out our stock charts in Excel format before you invest.
19. The Ichimoku charts of the Dow as well as the rest of the world are up. Even Tokyo, which is amongst the world’s weakness bourse, is turning around with the close ABOVE clouds or “kumo”. As such we expect the Dow to be up.
20. We expect Dow to rebound to test 12500 (amended based on Wolfe wave). We are still long on Dow CFD or S & P 500 index futures.
21. The ringgit was slightly strengthened to 3.0900 from 3.1100. We are still long ringgit/short USD.
22. CONCLUSION: The KLCI is now at its second highest level in its history!!! Expect higher
highs! Buy. Look for test of 1534. Index linked stocks still can rally. Buy and take profit on
rally.
Upside Targets: 1534 (Revised targets on 02/09/10)
Immediate downside targets: 1224/1154/1094/1033 (Revised on 5/07/10)
Ichimoku chart: Span A SUPPORT: 1292 (Revised on 5/7/10)
KLCI: H/SELECTIVE BUY/EXPECT FURTHER RALLY
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