Profit-Taking Healthy to Consolidate Gains

Stocks fell for profit-taking pullback on Tuesday, as overbought momentum and recent strong gains encouraged market players to reduce trading commitments. The FBM KLCI added 3.13 points to settle at 1,498.83, off an early high of 1,503.93 and low of 1,496.84, as losers beat gainers 605 to 410 on strong turnover of 6.44bn shares worth RM3.76bn.

Resistance at 1,500/1,520; Supports at 1,480/1,450

The local market should pause for profit-taking, which will be healthy to rebuild support, consolidate recent strong gains and ease current overbought conditions. On the index, profittaking should stall rise towards the 1,500 levels which capped upside in Jan 2023, with next hurdle at 1,520. Immediate chart supports are currently at 1,480, and 1,450, with better supports at 1,440 and 1,430.

Bargain Bumi Armada & Velesto

Bumi Armada need to climb above the 100-day ma (53sen) and 200-day ma (55sen) to enhance upside momentum and aim for the 61.8%FR (57sen) and 76.4%FR (63sen) ahead, while the 38.2%FR (47sen) cushions downside. Velesto will need breakout confirmation above the 27/2/23 high (28.5sen) to fuel further upside towards 32sen, the 123.6%FP (34sen) and 138.2%FP (36sen) going forward, while the 61.8%FR (20sen) cushions downside risk.

Asian Markets Rebound Ahead of U.S. Inflation Data

Asian markets were mostly higher on Tuesday as traders awaited inflation data from the U.S. for clues on the Federal Reserve's monetary policy stance this year. Apart from the latest tech rally, traders focus will be on key inflation readings from the US and China later this week. Data released earlier showed consumer price gains in Tokyo slowed for a second month in December, broadly in line with the Bank of Japan’s view that import-driven price pressures are subsiding. Meanwhile, December's U.S Consumer Price Index reading will be published on Thursday and is expected to show headline inflation rose 0.2% in the month and by 3.2% on an annual basis.

Federal Reserve Governor Michelle Bowman said inflation could fall toward the central bank’s 2% target with interest rates held at current levels, and offered potential backing for lowering borrowing costs if price pressures fade. Australia’s retail sales for November 2023 also rose more than expected, gaining 2% month-on-month and beating economists’ expectations of 1.2% in a Reuter’s poll. Japan’s Nikkei 225 rose 1.16% to close at 33,763.18, and the Topix advanced 0.82% to end at 2,413.09. In Australia, the S&P/ASX 200 climbed 0.93%, closing at 7,520.50, while the Shanghai composite index added 0.20% to 2,893.25.

Dow Slip Ahead of Crucial Economic Data

The Dow Industrials and S&P 500 ended slightly lower overnight as traders rethink the chances of a near-term interest rate cut by the Federal Reserve while waiting for inflation data and earnings results later in the week. The Dow Jones Industrial Average lost 0.42% to 37,525.16. The S&P fell 0.15% to 4,756.50, while the Nasdaq Composite inched higher by 0.09% to 14,857.71. The key focus for traders remains the December consumer inflation reading due Thursday and what it could mean for the chances of easing interest rates. However, two Federal Reserve officials on Monday poured cold water on Wall Street's already fading expectations that a cut could come in the next few months. The idea that inflation is cooling underpins trader’s belief that the US economy will skirt recession.

That conviction faces a crucial test on Friday, when big banks kick off the fourth-quarter earnings season. The market is pricing in a 59% chance that the Federal Reserve will start lowering interest rates at its March policy meeting, according to the CME Fed-Watch tool. That’s down from a nearly 70% chance one week ago. On the U.S. economic front, the Commerce Department released a report showing the U.S. trade deficit unexpectedly shrank in the month of November. The majority of the 11 major S&P sectors fell, with energy the weakest with a decline of about 1.5% while tech led gainers with a rise of only about 0.1%.

Source: TA Research - 10 Jan 2024