There are two ways to look at yesterday's market action. The FBM KLCI rebounded more than 50% off the day's low and resulted in the creation of a non-classical 'Hammer', which is usually a positive sign. However, as the index closed 6.8 pts lower yesterday and failed to break above July's low of 1,620-pt level, this candlestick pattern may suggest market weakness instead. Conversely, there is a possibility that the market may start stabilising after creating the non-classical 'Hammer' above last Thursday's low of 1,613 pts.

We believe the market action seemed more like a failed attempt to close above the 1,620-pt level despite an effort to bounce off its worst level of the day. We will have to continue monitoring the situation before adopting our bullish outlook for the near-term. Note that the FBM KLCI gained as much as 128.8 pts during the May-Aug 2012 period. Hence, the selling that started since last week is deemed insignificant.

From the current level, we detect three obvious support levels ' they are yesterday's low of 1,601-pt level, the 1,591-pt level and 1,582-pt level. To the upside, look for an immediate resistance at the 1,618-1,621 pts area, followed by the 1,633-1,641 'Downside Gap' created on Monday, as well as the 1,655 historic high.

Source: OSK