Monday, January 21, 2013

Political News Sparks Sell-Off On Stock Index 22nd Jan 2013

Tuesday, 22nd Jan 2013. The major correction on FKLI and FBM KLCI yesterday demonstrate how fragile is our stock market when it deal with rumour. Other news to follow.

"-Stocks on Wall Street rose on Friday, posting gains for a third consecutive week after strong earnings from General Electric Co. and encouraging news about the U.S. debt ceiling.

The S&P 500 Index SPX +0.34% climbed 5.04 points, or 0.3%, to end at 1,485.98, its highest close since December 2007, leaving it up 1% for the week. The benchmark had broken out to the upside on Thursday, with 1,475 now seen as a support level. On Wall Street, the Dow Jones Industrial Average DJIA +0.39% gained 53.68 points, or 0.4%, to end at 13,649.70; it rose 1.2% for the week."
"- Most Asian markets ended lower on Monday, with Japanese shares sliding back from last week’s multi-year peaks as a two-day meeting at the Bank of Japan got underway.
The Nikkei Stock Average JP:100000018 -1.52%  declined 1.5%, after soaring 2.9% Friday to its highest level since April 30, 2010. South Korea’s Kospi KR:SEU -0.05% , Hong Kong’s Hang Seng Index HK:HSI -0.05% and Taiwan’s Taiex XX:Y9999 -0.10%  slipped 0.1% each, while Australia’s S&P/ASX 200AU:XJO +0.13%  edged up 0.1%. China’s Shanghai Composite Index CN:000001 +0.48% ended 0.5% higher amid ample liquidity conditions."

" Crude-oil futures retreated from a four-month high as euro-zone finance ministers readied to meet in Brussels Monday to talk about the region’s debt trouble.
In the United States, lawmakers this week vote on budget issues. In the House, Republicans plan to use a Wednesday vote on raising the debt ceiling in a bid to get Democrats to detail spending plans. Crude oil for February delivery CLG3 -0.20%  lost 9 cents, or less than 0.1%, to $95.47 a barrel in electronic trading on the New York Mercantile Exchange. The more-active March contract CLH3 -0.14%   declined 15 cents, or nearly 0.2%, to $95.89 a barrel."
FKLI- Political News Sparks Sell-Off

It was a red Monday yesterday when both index futures and stock index went down substantially, eliminating most of the gain made on previous weeks. These Sell-off was likely done by institutional fund with structured transaction for the stock brokers to make sure their respective Sold their holding. These structured Selling transaction was meant for the big boys to unload almost all of their positions in the market "while they still can" as they hold the chances to do so earlier than the retail investors. Institutional often gained the hindsight to news and if the news so much concern the nation's economy or political event, they will act on it. Words out, local stocks were sold due to election fear as the parliament will have to dissolve latest by 22nd Feb 2013. Although this news alone does not produce massive Long covering, initial big Selling by institutional  followed subsequent or constant Selling activity will snow balled into a massive Selling pressure over time. Not only institutional but anyone will have to act or exit their Long positions if their shares went down more than 3% in a day. At close, the Jan contract   closed at the day low at 1,624.50 level after losing about 3.45% or 58 points. I would not know from technical perspective that the index futures could have dipped more than 2% yesterday, but there what I do know was the market is preparing to retrace starting late last week. The lower highs and lower low displayed on hourly chart since last Wednesday was an early hint for the market to retrace but not to have any major correction. Would you load all your Short position on the first sign of weakness, the answer would be unlikely because there was no confirmation that the market is likely to correct at that time. Most of the Short set up you might want to take was go Short after it failed from recovery when the Jan contract open gap down yesterday. Especially for this occasion where there is no sign of recovery, do not hope for technical rebound even the market have been ridiculously oversold because we are still far from any market bottom.

Daily Pivot Point
R2= 1690.50
R1= 1657.50
S1= 1608
S2= 1591.50
 Disclaimer: Information and opinions contained in this report are for educational purposes only. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness.

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