Malaysia’s FBMKLCI appears “over-extended”, with so many free bars above the upper-band of the Keltner Channel. It is observed that there is some extent of negative divergence as per the modified MACD.
One may consider assessing whether an equity index is overstretched by benchmarking its current valuation multiple against its historical long term average multiple.
One may also consider inter-market analysis. I intend to undertake an updated regression analysis by comparing the FBMKLCI against the movements in MYRUSD and Brent (USD)
Based on a simple desktop regression analysis, it appears that the FBMKLCI index (actual value: 1,803, as of 4 Jan 2018) is relatively over-extended if compared to its current forecast value of 1,739 but nevertheless, it is within its 95%-interval range of between 1,648 and 1,831.
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