Profit-Taking Pause Pending Fresh Buying Momentum

Profit-taking checked early gains on Tuesday, as the blue-chip benchmark hit a fresh threeyear high which encouraged traders to take some chips off the table. The FBM KLCI slid 3.86 points to close at 1,625.96, off an early high of 1,633.97 and low of 1,624.39, as losers beat gainers 795 to 413 on lower turnover of 4.66bn shares worth RM3.52bn.

Resistance at 1,634/1,640; Supports at 1,607/1,599

Stocks should fall back for profit-taking consolidation near-term, pending resurgent buying momentum which is key to absorb profit-taking and selling as the index approach levels not seen in more than three years. Immediate index resistance will be at yesterday’s high of 1,634, with 1,640 and 1,660 as tougher upside hurdles, while immediate supports are at 1,607, 1,599 and 1,575, the respective steadily rising 30-day, 50-day and 100-day moving average levels.

Bargain Maxis & Tenaga

Maxis will be attractive to bargain on weakness towards the key 76.4%FR (RM3.34) support, ahead of recovery upside towards the 50%FR (RM3.70), with tougher hurdles seen at the 61.8%FR (RM3.85) and 76.4%FR (RM4.04). Tenaga remains in strong uptrend mode, with sustained buying momentum to lift stock prices towards the 123.6%FP (RM15.63), 138.2%FP (RM16.46) and 150%FP (RM17.13) going forward, and uptrend supports at the rising 30-day ma (RM13.95) and 50-day ma (RM13.44) cushioning downside.

Trump’s Tirade Weigh on Asian Markets

Asian markets were subdued on Tuesday, as bets on a second Donald Trump term trigger trade and geopolitical concerns. The Trump presidency was characterized by an aggressive trade policy towards any country that the United States considered involved in unfair trade practices. This resulted in trade wars between the US and much of the world, including China, the European Union, Canada, India, and others. The most significant Trump trade war was with China, the second-largest economy in the world after the United States. Opinion polls show a close race between Trump and President Joe Biden, though Trump leads in several swing states that are likely to decide the election.

Traders also continue to look for developments from China’s Third Plenum, where high local government debt levels and a push for advanced manufacturing will be on the agenda. Japan’s Nikkei 225 gained 0.20% to 41,275.08, while the Topix added 0.34% to 2,904.50. South Korea’s Kospi inched higher 0.18% to 2,866.09 and Australia’s S&P/ASX 200 fell 0.23% to close at 7,999.30. The Shanghai Composite Index ended nearly unchanged at 2,976.30, while Hong Kong’s Hang Seng dropped 1.6% to 17,727.98.

Dow Rally on Retail Data, Earnings

The Dow Jones Industrial Average rallied to new highs overnight as traders cheered betterthan-expected economic data and corporate earnings. The Dow Jones Industrial Average surged 1.85% to close at 40,954.48. The 30-stock index hit an all-time high and closed at a record. The S&P 500 added 0.64%, closing at 5,667.20 and the Nasdaq Composite ended the day higher by just 0.20% at 18,509.34. Stocks closed in the green across the board as traders reacted positively to the latest U.S. economic news and better-than-expected earnings across multiple sectors. Retail sales data out overnight further validated trader’s belief that the Fed had achieved a so-called soft landing with the economy.

Retail sales came in flat but better than expected in June, rekindling trader’s optimism for a potential Federal Reserve rate cut later this year. The rotation from mega cap tech shares to small-cap stocks continued. The Russell 2000 is outperforming the Nasdaq Composite over the last five trading days by a degree not seen since 2000, according to Dow Jones Market Data. UnitedHealth Group jumped after reporting consensus-topping profit, lifting the bluechip Dow and the S&P 500 Health Care index to all-time highs. Industrial bellwether Caterpillar climbed more than 4%, making it the second-biggest gainer in the Dow.

Source: TA Research - 17 Jul 2024