FBMKLCI has been consolidating since the beginning of August. If we drew a line connecting the low from end March (not mid-March) to date, we can see that this line, SS should provide support to the index at 1545. With both MACD and Directional Movement indicators showing negative reading, the index is not expected to stage a strong rebound from the "uptrend" line, SS in the near term.
Chart 1: FBMKLCI's daily chart as at 14 Aug 2020 (Source: Malaysiastock.biz)
As noted in the recent market outlook post, our market is driven by 3 big theme plays. The first one is the play or rally on health care stocks (or, more specifically, glove stocks). From Chart 2 below, we can see that this index is likely to correct for a while since its MACD has hooked down.
Chart 2: Health Care Index's daily chart as at 14 Aug 2020 (Source: Malaysiastock.biz)
The second driver is technology stocks. This sector has also hooked down- even attempted to test its "uptrend line" on 12 August. Like health care index, the technology index is expected to remain weak after its MACD has hooked down.
Chart 3: Technology Index's daily chart as at 14 Aug 2020 (Source: Malaysiastock.biz)
The third driver is the droves of retail players getting into the market, probably driven by FOMO or fear of missing out. Many of the latecomers tend to zero in on the cheap stocks, and if we were to extract the total volume from the Top 35 Volume Stocks from 6 August to date, we would get an indication of how much of an impact this buying had on the market. I have tabulated and also plotted a graph of this below.
Table: Volume of Top 35 Volume Stocks compared to Overall Market Volume from Aug 6 to 14
Graph: Volume of Top 35 Volume Stocks compared to Overall Market Volume from Aug 6 to 14
Since the high volume stocks are generally 3rd liner and fledgling stocks (trading at less than 10 sen each), we can assume that the volume traded represents retail participation. They accounted for a whopping 60-64% of overall market volume on the 2 biggest volume dates in our market to date, i.e. 7 & 11 August. Since then, the volume of the top 35 highest volume stocks had receded. If retail participation stays low, then the market will likely to remain weak for a while.
Based on the above, we should remain cautious and wait out the market correction before taking more aggressive action. Good luck.