MARKET REVIEW

Without any fresh catalysts in the market, investors were focusing on the stronger-than expected US jobs data, which reduced the anticipation of interest rate cut in the upcoming FOMC meeting. This has dampened the market sentiment and traders took profits off the table; Hang Seng Index and Shanghai Composite Index lost 1.54% and 2.58%, respectively, while Nikkei 225 fell 0.98%.

Meanwhile, stocks on the local front extended its profit taking activities as the KLCI pulled back further by 0.29% to 1,677.64 pts. Market breadth was negative with 568 decliners vs. 267 gainers, accompanied by 2.12bn shares traded for the session, valued at RM1.68bn. Nevertheless, we noticed selected O&G stocks such as Yinson and Dayang traded higher for the day.

Wall Street ended slightly lower led by tech giant such as Apple following an analyst’s downgrade, stating a potential slowdown in sales in the upcoming 6-12 months. Also, investors were taking a cautious approach ahead of the FOMC meeting minutes that will be released on 10th of July. The Dow and S&P500 down 0.43% and 0.48%, respectively, while Nasdaq fell 0.78%.

TECHNICAL OUTLOOK: KLCI

The FBM KLCI continues to retrace for the fourth trading day and the MACD indicator has issued a negative crossover signal, while both the RSI and Stochastic oscillators are on the declining mode. The KLCI’s upside is likely to be capped around 1,700, while support will be envisaged around 1,666.

We expect the negative overnight performance on Wall Street may spill over to stocks on the local front, extending the pull back on the KLCI as traders are likely to stay cautious ahead of the FOMC meeting minutes. Also, without any significant catalyst leading the markets, we believe the KLCI may trade sideways over the near term within the range of 1,666-1,700.

TECHNICAL OUTLOOK: DOW JONES

The Dow is still trending sideways and the MACD Histogram has turned weaker for the past few sessions. Meanwhile, both the RSI and Stochastic oscillators are pointing downwards. Hence, with the weaker technical readings, the Dow could poise for further pullback over the near term. The resistance is envisaged around 27,000, while support is set around 26,500.

As the expectations on the Fed rates cut dimmed in the upcoming July FOMC meeting after the stronger jobs data last week, Wall Street is likely to stay neutral for the near term. Investors will continue to watch out for any news related to the trade discussion between the US and China as it will reaffirm the investment decisions on the longer term horizon. The Dow is likely to trend below the 27,000 psychological level without any fresh impetus.

TECHNICAL TRACKER: CLOSED POSITIONS

We squared off our technical tracker picks PESTECH (13.8% return) and TRC (7.9% gains) yesterday.

Source: Hong Leong Investment Bank Research - 9 Jul 2019