KLSE Outlook : A Short Term Hope

Since my last post in this blog, KLSE have been screaming bearish, with gloom and doom global news everywhere. The bull's screaming, being slaughtered by the bear, just getting louder and louder.

Even non-stockmarket player will tell you the market is very bad. Major commodity like CPO haven't recover yet. I think Malaysia's economy shouldn't be cheerful until CPO price recovered. Some says we should be buying gold. Gold? I said think again. Perhaps, they haven't check gold price's chart lately. Maybe cash is the king, but Ringgit Malaysia also depreciating against not so appreciating USD.

I had been in the bearish mood since early this year. It's because of I couldn't find even some short-term trading opportunity in the market. The only bullish outlook (short-term) was in early August as in my last post. Well, I thought it cannot be bearish all the way. Turnout, I was  wrong, the index went down and down like there's no tomorrow. I was thinking may be that what Dr. Alexander Elder refer to in his book, Trading For A Living; "when the market refuse to bark in response to a perfectly good signal, it gives you the Hound of Baskervilles signal. This show that something is fundamentally changing below the surface. Then it is time to get in gear with the new powerful trend". And that was a powerful downtrend.

Now, come 30th October 2008, the buying started and the index shoot up to 926 pt from the low 821 pt. With the global news and talks suchlike horrible black October, credit squeeze, corporate earning and giant corporation fall,  we didn't really see it coming. We have seen the market jumped in one day and crash the day after several time these months. It is kind of a nice surprise.

The market sells but who's buying?

MAYBAN is gaining a bit after a sell down and if you consider  the Indonesia's BII almost scandalous deal you can guess that  EPF is buying. Indeed, EPF have been shopping for many counters for the last couple of weeks. If not, the CI could have been worse, you know. It should be worthwhile to monitor EPF's favorites stocks. Look for those  blue chips and index linked counters.

So how about Valuecap? I don't know if the fund already got the RM5 billion fund from EPF. Valuecap still owe RM5 billion to the shareholders, due by Feb 2009.  Read here Now when Valuecap said it will borrow RM5 billion from EPF, it raise a rumor the money will use to pay the debt. Thought Valuecap make a lot of money last time. Second Finance Minister Tan Sri Nor Mohamed Yakcop explained  Valuecap here here. (I thought in 2003 it was 10 billion. Read here). Can RM5 billion really push the market much higher? Yes, I think it can. Just buy those index-linked counters that have the highest percentage of CI's composition.
With those said, I think it's still overall bullish next week. Of course it's just  short-terms trends driven by sentiment, the ugly bearish fundamental data is still intact.

Haven't see much in recovery gain for SIME, but EPF should be interested in SIME. Steel still not in favor but recently there some active buying in PERWAJA. Well, with its's IPO price 2.90 and been below RM1, how low we can we expect of it to be. The fact is there are many well beaten, oversold stocks that started to actively traded last week, you should be spoiled for choices. For smaller counters, I will say I am interested in TEBRAU, SAAG and RAMUNIA.

Be warned of syndicate playing. The dark side of market participants group are in active mode. They can help or destroy you. *Okay, may be I should use private equity fund instead of hedge fund. A  re-branded name anyway,  1998 market turmoil gave hedge funds a bad name.

Funny is, those foreign hedge funds* are buying. What I can identifed is that they are  buying many of recent active counters. Just for example, there even different funds buying and selling IOICorp recently. They even clashed in one the day, causing a very volatile day for IOICorp. By now IOICorp shares looks fine. I said funny because that after the news that foreigners are selling regional investment  to cover theirs US investment  losses.

klse composite index

Taking the recent index low 801.27 pt and high 926.65 pt is was 125.38 pt gain. And latest index is 868.98,  which made the 125.38 corrected now by 57.76 (46.06%). Now, 46.06% is already a valid correction (assuming a correction must be at least 33%). With a bullish last bar (or candlestick) on last Friday, the market should continue the up trend next week. Keep on holding. Also notice the high volume, you cannot ignore that. Even if the correction persist it should not go beyond the low 801.27 . (creating double bottom). Although I think so,  I hope the index will correct more to at least 66% (about 848 pt) or further for buying opportunity but the buying force is strong. For buying in this scenario, I will check the  correction for the specific counters rather than the index movement. See the KLSE Composite  Index chart above for the retracement level.