orrection may have finally set in after three weeks of straight rise. The three 'Dojis' formed late last week, coupled with the overbought daily RSI, were indeed signs of a lack of buying conviction. Selling took over yesterday as it closed on a full-bodied black candle. Weakness was underlined by the opening gap and the close at the day's low, the lowest in four days. This should lead to a correction of the index's two-month rally. Nonetheless, the index is comfortably above both the 50-day MAV line and the rising 200-day MAV line, supported by the longer-term positive 'Golden Cross' that emerged in February.

Thus, the index is likely to trade lower today. Support is now at last week's low of 1,630 pts. A close below last week's low indicates strong selling pressure, and should confirm the start of a correction. Supports are at 12 July's low of 1,623 pts, 9 July's low of 1,614 pts and 5 July's low of 1,610 pts. Stronger support remains just above the 1,600-pt psychological level, at the three-week low of 1,602.50 pts. Resistance is now 1,645 pts, just above yesterday's high and only a close above 1,645 pts can any buying be taken seriously. Again, a break of the psychological 1,650 pts, which was tested last Thursday and Friday, is needed for the index to continue its climb. Further selling can then be reasonably expected at every 10-pt interval.

The selling pressure that returned on 6 July still dominates, as the commodity again closed below the RM3,000 psychological level. This came after the failure to break above the RM3,050 resistance level last Friday. This keeps it below the declining 50-day MAV line and the 200-day MAV lines, reinforced by the longer-term negative indication of the 'Death Cross' that emerged in the early month. This should see the commodity moving back in the direction of the prior downtrend, as suggested by the latest lower highs of RM3,193 and RM3,182.

Thus, selling is likely to continue today. A firm downside bias should not see a close back above RM3,000. Support is at RM2,970, the gap low of 22 June and a 62% retracement of the recent month-long rally. A close below the support level is needed to keep the downside bias intact, especially with the 'Hammer' lookalike candle formed yesterday. Further support is at RM2,940 and the gap of 19 June at RM2,900. Given the high volatility of late, a return of buying cannot be ruled out altogether. This is signalled by a close above yesterday's high of RM3,008 but again, a close above the RM3,050 resistance, or preferably above last Friday's high of RM3,065, is a required confirmation. The next resistance is at RM3,100, the 76% retracement of the late May-early June decline and 38% of the Apr-June decline.

Source: OSK