KLSE : outlook update 27 Nov

Above: KLSE Composite Index daily chart (click the pic for a full view)
If you read my last posting, I was expecting a bullish KLSE this week. First it looked fine; DJAI gained hundred points, regional's market was good and Bank Negara has just announced an interest rate cut.  How KLSE respond? Not good. I think that was a rare occasion when KLSE responded badly over an interest rate cut announcement. If that Monday was disappointing, Tuesday was no better.

DJAI has gained over 1,000 pt and region (look at Singapore's Strait Times) was bullish for the past few days. Now, what is wrong with our beloved KLSE?

If you asked me, I will just say, market leaders are not buying. By market leaders I am referring to EPF, PNB and large private unit trust fund.  When the market leaders buy, the CI rises. This will trigger excitement (amid the longer term bearish outlook) and other sidelined players will follow.

Now,  updating my KLSE outlook,  I like to  refer you again to a quote by Dr. Alexander Elder 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".

If this is what happening, the downtrend can be nasty. Anyway, the previous bottom (801 pt) is well supported and I believe that level could be the worst that can happen from now until end of the year. The comforting part: the 61% of Fibonnacci retracement (848 pt) still support (see the chart). Based on my understanding of Fibonnacci, if  the CI start going down below that,  then only you need to be warned  because the index will likely revisit the previous bottom (801 pt).

Somebody asked, shouldn't Valuecap start buying? No lah. Since the second coming of Valuecap was initiated by our beloved DPM Najib, perhaps Valuecap will only be utilized after March (if you clueless why I said March, then I am sorry for you). But do not discount that 800 pt is the level where it is perceived as the bargain or value for money buying point (Its not just hypermarkets having price cut you know and how low we want it? Just like Datuk Shahrir suggested, we, people don't be so greedy*). When the index revisit that level and big players not supporting, then only Valuecap come to the rescue.

On 2008 window dressing:: Last year (2007), the corporate earning was good and the year-end traditional window dressing just so, so. Now, I am thinking that if the unit trust fund and most listed companies  has less earning this year, shouldn't that increase the need for them to window-dress a lot more?

*Can't help mentioning  that. Tell me how many time a government's spokesman told the rakyat marhain not to be greedy (read here). All this years I thought the government are greedy, silly me.