KLCI futures to stay under pressure

THE Kuala Lumpur Compsoite Index futures contract on Bursa Malaysia Derivatives closed at 1,095 with an open interest of 34,261 contracts last Friday.

The spot contract remains in bear territory, having failed to consolidate within the 1,120 to 1,150 range. Under duress, the July contract corrected to a low of 1,092 last week looking very unsettled as traders continued to focus their attention on the current political climate.

The presence of the imposing tall black marubozu candlestick last Friday may have some effect on trading sentiment this week. With the relatively negligible 10-point discount to the cash index, some traders may fear a carry forward of further shorting activities into this week as market momentum remains depressed and seemingly unable to sustain the technical rebound.

The momentum indicators are still heading south in neutral territory, indicating that there may still be room for the market to correct.

The weekly indicators are still struggling to break above the current bearish trend as prices continue to stay below the 200-day simple moving average.

The weekly Relative Strength Index (RSI) is still heading south and has yet to enter oversold territory, indicating that perhaps support may only be located at the 1,050 level which was tested recently. The Moving Average Convergence Divergence (MACD) indicator and the Bollinger Band remain largely lacklustre.

Tactically this week the spot contract is likely to stay under pressure as sentiment remains uninspiring. Support can be located at the 1,050 level but as the July contract will be expiring soon, it may stay close to the composite index before its expiry date. Any weak technical rebound may be a double play for a "dead cat bounce".

Technical readings

The RSI closed at the neutral region.

The Commodity Channel Index closed in overbought territory.

The MACD indicator remains in negative territory with the faster average below the slower.

bernard@tactician.com.my.

The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.