The market decline last week was not an indication of selling pressure. Rather it was a correction of the uptrend because the KLCI is still above the short term 30 day MA. The index is now (01 July 2014) near the short term MA of 1876 points and the uptrend line support level.
Momentum indicators such as the RSI and Momentum Oscillator are showing signs of weakness after gaining strength two weeks ago. Nevertheless, the indicators are still above the mid levels which indicate that the momentum is still bullish.
The MACD indicator crossed below its nine day MA trigger line after climbing above it two weeks ago. Furthermore, the KLCI has pulled back the middle band of the Bollinger Bands after trading above the top band two weeks ago.
Technically the KLCI is still in bullish trend but the pull back last week caused the bullish momentum to weaken. The index is now at the short term uptrend support levels and therefore a rebound is expected. A rebound is likely to happen as the ringgit is expected to appreciate against the weakening USD.
The index may test the target of 1910 points as long as it stays above the support level of 1880 points. Now that the index is at the support level, expect a rebound. Further decline however may cause the market to move further into correction and next support level is at 1850 – 1860 points.