Since April 2018, after the KLCI hit 1896 points, it has
been on the downtrend for almost 1.5 years.
The KLCI closed at 1571 on 18-Oct-2019, lost 325 points, or negative 17%
to-date. Internal and external factors
such as political power transition, uncertainty of government revenue, and
US-China trade tension are weighing on the stock market performance.
According to IMF recent report (Read
more here), 2019 global growth is forecast at 3.0%, its lowest level since
2008–09 and a 0.3 percentage point downgrade from the April 2019. Growth is projected to pick up to 3.4 percent
in 2020 but it is still a 0.2 percentage point downward revision compared with
April’s report.
While the flip-flopping geopolitical dramas have no end in
sight, what could investors do to gauge the performance of the stock market?
The following chart shows the weekly KLCI performance for
the past two years. A clear MACD
divergence (Read
more here) has formed since Jan 2019.
Moreover, it has formed a double -divergence pattern which indicates
that the reversal of downtrend might be a strong one. If the MACD divergence is confirmed, the
first price target will be 1650, which again coincides with the projected GMMA cross-over
region. Thus, from technical analysis
perspective, year-end Bull Run might be possible.
Be prepared, don’t get caught off guard if
the market suddenly turns bullish!
