With each passing day, our main index is becoming more and more like a Potemkin village- a beautiful facade that hides the carnage unseen by the general public. Today is no different: The index - by that I mean FBMKLCI - was up 3.7 points while the scoreboard was showing losers outnumbering gainers by 602 to 269! Who can we believe- the index or the scoreboard?!
Chart 1: FBMKLCI's daily chart as at Aug 8, 2017_12.30 (Source: Shareinvestor.com)
After you've glanced at FBM70, FBMSCAP & FBMFLG, the true state of the market revealed itself. Our market has weakened steadily over the past few weeks. The sudden selldown for some high-flyers is a warning sign of more selling to come.
Chart 2: FBM70's daily chart as at Aug 8, 2017_12.30 (Source: Shareinvestor.com)
Chart 3: FBMFLG's daily chart as at Aug 8, 2017_12.30 (Source: Shareinvestor.com)
Chart 4: FBMSCAP's daily chart as at Aug 8, 2017_12.30 (Source: Shareinvestor.com)
Even the brave FBMACE may be waving the white flag. It could have broken below its uptrend line. This is supported by the -DMI trending above the +DMI. Fortunately, MACD is still above the zero line, which means that the downtrend has not started for FBMACE.
Chart 5: FBMACE's daily chart as at Aug 8, 2017_12.30 (Source: Shareinvestor.com)
Two months ago I wrote about the weakness in the market and the possible correction that will come which will present better opportunity to buy stocks at more attractive prices. Our market has been correcting ever since and prices are definitely more attractive now than in June. In times like this, you must avoid the urge to trade for small gain. Instead you must stiffen your resolve to invest for the long-term and to weather the short-term pain that will inevitably come as some of your stocks will sustain short-term losses before the market comes back. Good luck!