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Thursday, January 1, 2009

2009 Turning Upwards - cautiously bullish

2009 Turning Upwards - cautiously bullish By Zhuge Liang

We take a brief break from our New Year’s Eve break to bring about some market developments. As readers may recall, we were waiting by the sidelines for some tangible signs before jumping into the bullish bandwagon. We saw those very signs which we were looking for appear yesterday and converging together to form a wave which will likely push the KLCI upwards in January.

Hence, we are now switching to a bullish mode.

Positives :

a) President-Elect Obama’s inauguration day 20th Jan
No doubt the world is waiting anxiously for the inauguration of President Elect Obama on the above date. Leading to that special day, President Elect Obama has already gotten everybody excited by appointing an impressive cast to lead his economic team (Timothy Geithner as Treasury Secretary; Lawrence Summers as Director of theWhite House National Economic Council and Paul Volcker as Chairman-Designate of the President’s National Economic Recovery Advisory Board).

After his inauguration, the new President will be expected to announce a significant stimulus plan to jumpstart the US economy. The stimulus plan is projected to be as large as $677-775 billion dollars (source : AFP). The anticipation of the inauguration of Obama and the announcement of the stimulus plan will likely lend some upward force to the US as well as global markets.

b) KLCI trading above short term MAV line
Technically speaking, the KLCI is trading positively above its short term MAV line. The KLCI’s immediate strong support is pegged at the 880 level while the next level of resistance lies at the 926 level (45 points away).

c) The return of Holidayers
Traders worried about the thin volume in the KLCI might be reassured by the return of the market players after the long Christmas – New Year’s Eve break.

Watching the Tensions in the Middle East
While we are optimistic of the KLCI, we are cautions and wary of the on-goings in the Gaza strip. Israel has been pummeling the Hamas-ruled Gaza with rockets for 3 days now, leaving more than 300 casualties. At this point of time, there are still no signs of Israel easing their offensive pressure. We will be watching this event closely. Any escalation of tensions in this part of the world may have negative effects on global markets.

Strategy : Turning bullish for January
We are now turning bullish and optimistic for the month of January. Counters like the high beta AMMB and the oil price tracking SAPCRES might be appropriate trading counters for traders to ride the up-wave. For second liners, good trading opportunities exist in steel counter companies like LIONCOR and LIONIND. As a note of caution, we are also tracking the on goings in Gaza closely to detect any drastic escalation of violence and tensions within that region.


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