*Disclaimer: This material is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to purchase or sell the product mentioned. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks. If there are any questions, please contact me (Jay)

Yesterday, STI was seen attempting to rebound but it ended up fruitless as concerns of the European crisis persisted yesterday. STI opened slightly higher yesterday and started to climb towards 2850 level again when bargain hunters started to get into the market. However, after lunch time, HSI started to plunge strongly and STI follow suit. Coupled with weak opening in the European market, STI closed 8.54pts lower and ended up at 2822 level. Concerns of European crisis certainly are the main reasons for the current market bearishness. Last night, DJI ended 156pts lower which broke another of its support level. Will STI be able to hold at its upcoming support level?

STI ended up with a black candle with upper shadow yesterday. Its upper shadow tested the 200ma line and it signifies that 200ma is resisting STI’s upside. This also confirmed that STI is now trading below 200ma and the previous day’s movement is not a whipsaw. Short-term indicators continued to show bearish momentum and are likely to continue today. Oversold indications persisted and there is no clear sign of it turning out of the oversold zone. Therefore, STI will likely to continue to head towards 2790 support level to test it before a significant rebound can occur.

The banks closed slightly lower yesterday as they are still testing their support levels. DBS is now trading below its 20 & 50ma lines and is likely to head towards its 100ma at 13.30 level to find support. Ocbc tested its 100ma support line at 8.54 level and will likely to continue testing this support level. Most of the properties were trading flat yesterday and they were seen attempting to rebound. Capitaland was the only that ended lower yesterday as it tested its 200ma support level at 2.59. Capitaland’s strong support level is at 2.56 level and it will likely to test this level. Citydev managed to end up higher yesterday but its rebound was resisted by its 20 & 100ma line. If Citydev fails to hold its support at 200ma, 10.00 level, further downside will persist for Citydev.

The offshores sector was seen to be holding their support well after closing mixed. Sembcorp was the only one that continued its rebound and could be testing its resistance at around 4.97 level. There is a possibility that Sembcorp might be forming a lower high formation here. Kepcorp and Sembmar were trading horizontally for the past few days. If they break this horizontal support, they will be sliding down further. The commodities carried on their bearish streak yesterday as they seem like falling into a bottomless pit. Noble grp and Indoagri formed a black inverted hammer candle and this could be a hint that the selling pressure is weakening. If white candle is formed, they will have a better chance of rebound.

In conclusion, despite STI attempt to rebound back above 2850 level yesterday, bargain hunters were being shot down by the sellers yesterday. Yesterday’s movement has also confirmed that 2850 level is now acting as a resistance level and STI will be more likely to head lower today. Support level for STI stands around 2790 level and it will be the likely target for STI to slide towards. Sectors that might bring STI down further will be the commodities and properties. However, the banks and offshores might be the one triggering further drop if their support levels fail to hold.

Long traders have to wait till another support level to trade for a rebound. Shortist might be tempted to do short position but careful selections might yield good shorting counters with good risk rewards. The banks and offshores sector might be a good sector to consider for downside breakout play.

*Disclaimer: This material is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to purchase or sell the product mentioned. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks. If there are any questions, please contact me (Jay)

STI failed to confirm with bullish reversal signal yesterday as it failed to hold at 2850 support level. STI opened with a gap down in reaction to DJI’s previous day’s bearish closing. STI struggled to hold on its support level of 2850 but it failed to hold after HSI started to tumble down strongly after opening. This caused bargain hunters on the previous to exit fearing that STI is going to slide down further. Flat opening by the European market did not help to improve the sentiment and hence, STI closed at 2831 level, 45.55pts lower. Last night, DJI continues to head lower by 33.45pts. Will STI be slide further today? Where will the new support level for STI be?

STI closed with a long black candle. This black candle signifies that STI is experiencing strong bearish movement yesterday which confirms that 2850 support level is broken. Breaking of 2850 support means that 200ma support level is also broken. 200ma is an important line to determine if the mid-term of the market will be turning bearish. Since, 200ma is broken; STI’s mid-term trend might have changed into downtrend. The short-term indicators failed to confirm their bullish signal yesterday. They continued their bearish sentiment and stayed oversold. Therefore, STI might still be heading lower until they form a proper bullish reversal formation. The new immediate support level for STI now stands at 2790.

The banks ended up lower yesterday as the bearish sentiment of the market persisted. Their bullish reversal candle failed to confirm yesterday. Furthermore, the 3 banks failed to hold at their 20ma line and close below it. Ocbc suffered the strongest sell off which caused it to trade close to the 100ma line. Ocbc might be heading back to its sideways support level at around 8.55 level. The offshores were unable to head higher yesterday but they were able to hold their support levels well. Sembcorp continues to stay above 100ma despite the selling sentiment yesterday. Kepcorp and Sembmar might be forming a firm support level before they can rebound.

The properties were also trading lower yesterday but they did not suffer strong selling pressure. The only property that suffers strong selling pressure is F&N. F&N broke its 50ma support line yesterday and even tested 100ma line. It closes exactly at its support level of 6.57 level and is threatening to head lower if this support level fails to hold. F&N had also failed to continue its uptrend movement and is now poise to start forming either a sideways or downtrend. Much of STI’s bearish movement comes from the commodities yesterday. Olam gapped down strongly yesterday after it weak 1^st quarter earnings report. Olam dropped a whopping 10.8% lower yesterday which broke multiple support lines. The rest of the commodities also followed the fall with an average of 3% down as market participants were concern of the drop of earnings in the commodities sector.

In conclusion, expectation of a rebound at 2850 level has now vanished as this is one of the strongest support level being seen. Breaking of 200ma support line will likely to trigger off more selling sentiment going forward as this is a key line for many investors to reconsider holding on to their investments. If STI fails to head back and stay above 2850 level, it will give STI a downside target of at least 2790, as 2790 will be the next support level of STI. The indicators are not favourable on the bullish side right now and there is a good chance that STI might test 2790. Oversold condition might continue to persist for now.

Long traders can continue to wait for bullish reversal signal with confirmation to execute long positions. Shortist might be encouraged to take further profits as the prices slide lower.