Bulls continued to maintain charge with CI chalking up another positive week by adding 3.1%. We had anticipated for some breather and consolidation which was not to be during the previous week as buying momentum continued to fuel the rally.
Technically, the CI remained in a positive zone with the primary uptrend since the low in March being very much intact. The resilience of the current run-up had been most remarkable as evidenced by the shallow pullbacks with buying support lending strength on every dip. Moreover, the volume on dips had been relative low indicating strength. Abundant liquidity, benign overseas market conditions together with corporate earnings which are very much within consensus had together helped to underpin the current run-up.
While we are maintaining our positive bias in the near term with a target of 1,070 – 1,100, we are also not ignoring the fact that pullbacks can emerge when least expected especially with markets now having gone up by 24.7% in a little more than 2 ½ months since the March 2009 low. Our attention remained very much centered on the negative divergence that is developing in the daily RSI, the thinning volume on the recent uptick as well as a potential disappointment with the global economic recovery could perhaps cap any further substantial upside from the 1,000 plus levels. On the weekly, the long uptrend line since the Asian Financial Crisis low looks set to be challenged at near the 1,053 level. With the weekly RSI likely to have some legs left, the resistance is therefore likely to be punched through.
Our short term strategy remained the same – which is to let the profit run but look to top-slice as and when the market heads towards our envisaged 1,070 – 1,100 levels. Immediate support for the market is now pegged at 1,037 with 1,026 as next.
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