KLCI Bearish Sign Is A Good Sign

Yesterday, it was a`rare occasion since early April rally, KLSE Composite Index went down* when Dow Jones IA jumped a lot.

Is that a good sign? A bearish sign is a good sign if you been waiting for the index to pull down for buy opportunities. The index have been trending up for nearly two months, IF ONLY you knew you would be holding on and would get bigger profits. But then, we will never know because likely also you will anxious to take profit and will not take the risk of holding so long especially when the fundamental data are not that encouraging.

Also likely, you sold your shares at the very early rally stage if you been holding prior to that. And that made you kind of missed the boat (hey, there always another bigger boat). If you been short term swing trading, I think you already out by now and managed to get one or two round of trades. I guess, that leave scalper : day traders and punters still looking for trades. Of course institutional and fund and still there holding, if not the index already went south fast. That explain the thinner VOLUME but index still steady.

At this time, the perception is that market already deep in overbought zone and the correction is coming. Thus, I think many of us prefer to wait. A friend put it as, " Market ni memang sudah masak". A bearish sign will be a good sign since it's not just because of we don't need not wait so long for another buy opportunity but its also make the market more 'healthy' and 'attractive'.

Now, a bit of technical reading:
dj-260509 klci-260509

Above: KLSE Composite Index chart and DJ Industrial Average (click pic for a larger view)
Below: KLSE Composite Index chart :divergence (click pic for a larger view)

Based on the DJIA chart, micro double-top has formed, indicating the DJIA is going to correct or sideway for a short while. For KLSE, the Composite Index still up trending within the channels, no sign of breaching the channel's line, signaling the trend may continue. But, if you look closer, there are divergence signals; technical indicators such as RSI, Money Flow Index, MACD etc are in diverged with Composite Index. It mean the technical indicator not confirming that the up trend will continue soon, suggesting correction is in order. I will wait for the CI to breach the bottom channel line to confirm.

Note that I am looking at short-term perspective. On the middle-term time frame its still on bullish wave. On the other hand, my longer-term perspective says its on bearish wave. It's kind of wave within wave thing. Wait, I will re-check my CI Elliot wave charts first.
*Could be due to BN announcement "The economy contracted by 6.2% year-on-year basis on the first quarter due to significant deterioration in external demand".