Market Review

• Taking cue from weak performance in world stock markets, KLCI declined 11.45 pts or 0.70% to 1629.77 on Monday as global sentiment was jittery ahead of FOMC meeting on 14-15 this month; BREXIT referendum on 23 June; correction in oil prices; and weakening Ringgit.

• Dow continued to decline overnight by 132.86 pts or 0.74% to 17732.48, weighed by a correction in oil prices; renewed global health concerns; and investors looked ahead to the week's scheduled Fed meeting and BREXIT referendum on 23 June.

Technical Insights

• In the midst of correction

• Based on weekly chart, the trend of KLCI is in the midst of experiencing a correction (see FIG4). It formed an inverted Hammer last week, suggesting that any rally would be capped. The local benchmark index is likely to find strong supports near 1614.14 and the psychological level of 1600 before it could hit 1580-1575 territories.

• Based on daily chart, although y esterday’s Hammer is classified as a reversal candlestick pattern (see FIG3), the likelihood of technical rebound is not convincing as reading from MACD, RSI and Stochastics is not oversold and still hooking down.

Market Strategy

• Albeit yesterday’s Hammer candlestick indicating t he likelihood of technical rebound, we are of the view that the rebound is not convincing, amid still falling oscillators; correction in oil prices; weakening Ringgit; declines in US stocks; jittery ahead of FOMC meeting on 14-15 this week; as well as uncertainty surrounding the looming BREXIT referendum on 23 June.

Source: Hong Leong Investment Bank Research - 14 Jun 2016