REVIEW: The consolidation channel took form over the course of the past week as the FBM KLCI was seen moving in a tight sideways pattern.

       Over the course of the five days, the index traded in a range of 1,509 to 1,525, representing the lower and upper limits of the current trend.

       As has been the case in recent weeks, the fast-rising number of daily new Covid-19 infections are defying the government’s lockdown measures.

       While investors had received the latest movement restrictions with guarded optimism, given the quick results of the first lockdown last year, this positivity was eroded by the jump in coronavirus infections to a record 13,215 new cases on Thursday.

       Earlier in the week, the Finance Minister’s announcement that the government was looking at slashing its outlook on 2021 GDP growth to about 4% from 6.5%-7% confirmed the inevitable – that the domestic economic recovery was taking a big step back.

       While the Malaysian market has been brought to heel by the pandemic, the start of the corporate earnings season is creating some buying opportunities on Wall Street. Brimming with positivity, US traders bought up the Dow Jones to near the 35,000-mark while the S&P500 also hit new record levels.

       There were inflation fears plaguing sentiment following the release of a report that showed the consumer price index rising 5.4% in June, which was more than expected. Asian markets were seen tracking lower on Wednesday following the report.

       However, despite the temporary retreat in equities following the report, investors were content to maintain their bullish stance, given the expectation that the rising inflation was transitory due to the reopening economy.

       Meanwhile, the FBM KCI remained range-bound, edging higher and lower in turn over the course of the week, but within a narrow trading band.

       Some excitement was seen returning to glove counters, given the jump in global Covid-19 cases, which has improved the demand outlook. After a long descent since April this year, sector leaders Top Glove Corp Bhd and Hartalega Holdings Bhd were seen ending the week with a positive performance, signalling a period of bullish retracement.

       Technology stocks also received a midweek boost after Chinese regulators approved Tencent Holdings’ plan to acquire search engine Sogou Inc. Bursa Malaysia’s Technology Index jumped over 3% on Wednesday, tracking the tech rally in China.

       Yesterday, the FBM KLCI ended on a positive note, up 1.66 points for the day to 1,522.48.

       Statistics: The major index ended the week 9.59 points or 0.6% higher over the previous Friday at 1,522.58. Total turnover for the trading week stood at 22.78 billion shares amounting to RM14.32bil compared with 27.39 billion shares worth RM16.37bil in the previous trading week.

       Outlook: The FBM KLCI ended below the 1,525 resistance yesterday, reaffirming the continuation of a consolidation trend.

       There is a clear bearish bias as the index remains caught in the grips of a short-term descending trend line while the 14, 21 and 50-day SMAs are applying downward pressure.

       But all is not gloom and doom. Given the market has halted its correction phase and showed resilience over the last two trading days, there are indications that the FBM KLCI is coiled to bounce higher in anticipation of positive leads entering the market.

       Looking at the technical indicators, the slow-stochastic has inched higher to 66 points while the daily moving average convergence/divergence line is curving higher in a bid to make a “buy” call.

       Above the 1,525-mark, the index is looking at further resistance at 1,540, where the 21-day SMA is currently descending. There is immediate support at 1,510, representing the lower end of the week’s trading range, although firmer support is found at the 1,500 psychological support.