As from yesterday Malaysia stock market technical charts, we are having a confirmed lower highs and lower lows in Kuala Lumpur Composite Index (KLCI). Malaysia has always been a net exporter of crude oil but recently has to raise its petrol and diesel prices by more than 40% and this causes unhappiness among the already angry citizens on the inability of the government to curb corruption and also the rising costs of living. Recent Malaysia general election on the 8 March 2008 has taken many people by surprises as the country was almost taken over by the opposition coalition party which they called by the name of Pakatan Rakyat. The ruling party Barisan Nasional (National Front) lost its 2/3 majority privilege that they enjoyed for 50 years. On the opening of the stock market on the 10th March, KLCI dropped more than 130 points and triggered its circuit breaker which is 10% for the first time in history. Recently there are many rumours saying that there a number of defections of the Barisan Nasional MPs to the opposition side which could overturn the ruling government any time soon. With political instability and a number of corruption cases that involved billions of dollars, there isn’t much good news ahead for Malaysia. Today the Kuala Lumpur Stock Exchange (KLSE) suspended it trading due to the computer system down. Let’s take a look at its equity and futures daily charts.
KLCI closed at 1,153.70 on the 2nd of July downed by 22.09 points (-1.88%) and have taken out the previous low of 1157.47 points by only a small margin. My outlook for KLCI is extremely bearish for the moment and I am seeing KLCI to go down further below the 1,000 points level.
FKLI July 2008 futures contract closed at 1,144 after retesting the previous low of 1,142. FKLI July went as low as 1,137.50 on the 2nd of July. Today the FKLI July futures contract opened at 1,126.5 and closed at 1,117 which was a discount of 36 points from the cash market. The previous low had been taken out by the bear. Although the equity market was not traded for the day due to computer technical issues, the futures market has taken the bear lead.
My call is to go short on FKLI on the breakdown of corrective rally and to dispose any equity positions that you might have if you have not done so in the first place. You can always pick it up again after the selling pressure is off which can be quite a distance from now. Remember that any rally from here is for you to sell and not to go long especially stock equity as the trading volume can be very thin. The low of FKLI July today was at 1,110 which also coincide with the Fibonacci retracement level for intraday chart. That means there is some small possibility for the futures market to rebound on Friday opening. Bear in mind that this is only a possibility based on technical analysis. The performance of Dow Jones today has some impact on the opening of Asian stock markets tomorrow. Keep your short position and add short at crucial Fibonacci retracement level at 1,169 (61.8%), 1,158 (50%), 1,147 (38.2%) and 1,133.50 (23.6%). Always remember to watch for trading confirmation before you jump in.
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Around 12pm today, we have another breakdown from the previous low of 1104.50 for July 2008 contract. Bearish trend for FKLI continues.