Morning review – 15th December 2008

Good morning! You may have noticed that I have added a link to my blogroll on the right. TheFinance.sg is a collection of investment related blogs and information and covers quite a huge area of money related matters and how some people like you and me work towards financial freedom. So do check it out sometime!

Onto the technical charts now. The US market ended lower on very light volume and the latter is expected to continue due to the holiday season. Also, traders are awaiting volatility from Options Ex on Friday to be done as well as earnings report from Goldman Sachs which is seen as the gold standard. The market I believe has already priced in the first ever loss Goldman is gonna make, now it is gonna be if the actual earnings are better or worse than expected. The FMOC is also gonna come out and the effect of rate cuts I feel are gonna be minute, but what is key would be what they are gonna say about the economy. Is it gonna be better soon, or is more bloodshed gonna come our way. The market should react accordingly. Last point, recall that for the US market, light volume favors the upside. In the near term, I am positive biased. In the immediate term, the whole slew of readings and Op Ex puts me in a neutral stance. I expect a pivot day to be set sometime this week but do remember that we can only look back after sometime and confirm that yes, so-and-so day was a pivot day. I will be biased on the positive side on light volume all the way till Jan, and unless exceptionally bad and unexpected news comes out, my own indicators show that the downside could be limited to my earlier analysis of the S&P being suppported at the 820 and ultimately 800 if 820 is broken.

Onto the STI. It has also been experiencing lower volume which is traditional to the December period as traders and institutional investors go on holiday. I note that the support at 1740 seems to hold for now and this is generally bullish in the immediate term. However on the upside it appears capped with very little strength. This puts the STI back into a sideway momentum and it might be better to wait for a breakout on either side before a good trade can be done. Indicators are slightly bullish but I am gonna take a neutral stance for now as momentum could swing either way and potentially whipsaw people out.

Across the board, the trend is still down. Any sustainable momentum on the upside has to be proven. For the S&P a good number to be and hold above is from 930 towards 1000. If it can hold above 1000, then it could be clear that the momentum has changed and is sustainable. We don’t want something to head up 5 rungs only to come down 7 rungs, do we? Maybe some of us do, which is what the short sellers are hoping for. An unsustainable rally at resistance is one of the perfect spots to put in short positions. For STI ideally, a breakout at 1915 (major resistance) and the ability to hold above would be good for the upside. However my fibonacci retracement levels show that the upside could be somewhat limited hmm… but we have around 100 plus points on the upside to play with.

Have a good week ahead!