Technical Analysis – Aug 25th 2009

The markets did very well today spurred by a good breakout on the US markets. I will chart the US market indices in the next post. Tracking regional bourses the STI gap covered and hit right smack into the resistance as I anticipated!

What’s next? My earlier post is still in play Resistance is where it is now. A breakout could see 2650 and subsequently 2700. I do not foresee this being breached in the immediate future.  Support is at 2590-2600.

Here’s an interesting email which I received today. These are for your reference only.

Roubini Sees Big ‘Double-Dip’ Risk: Report
NOURIEL ROUBINI, ECONOMIST, RECESSION, DOUBLE-DIP, DOOM, CRISIS
Reuters
| 24 Aug 2009 | 12:20 AM ET

Nouriel Roubini, one of the few economists who accurately predicted the magnitude of the
world’s recent financial troubles, sees a “big risk” of a double-dip recession, according to an opinion piece posted on the Financial Times’ Web
site on Sunday.

Roubini, a professor at New York University’s Stern School of Business, said it appears the global economy will bottom out in the second half of
this year, and that U.S. and western
European economies will likely experience “anemic” and “below trend” growth for at least a couple of years.

Yet he warned that policymakers face a “damned if they do and damned if they don’t” conundrum in trying to unwind their massive fiscal and monetary
stimuli to keep the global economy from toppling into a depression.

He said that if policymakers try to fight rising budget deficits by raising taxes and cutting spending, they could undermine any recovery.

On the other hand, he said if they maintain large deficits, worries about excessive inflation will grow, causing bond yields and borrowing rates to
rise and perhaps choking off economic growth.

Roubini said another reason to worry is that energy, food and oil prices are rising faster than fundamentals warrant, and could be driven higher by
speculation or if excessive liquidity
creates artificially high demand.

He said the global economy “could not withstand another contractionary shock” if speculation drives oil rapidly toward $100 per barrel. U.S. crude
oil futures traded Friday at about $73.83.

Roubini said the anemic growth he expects would follow a couple of quarters of rapid growth, as inventories and production levels recover from
near-depression levels.

Here’s another write up from the resident technical analyst from UOBKH -

The final countdown
Last week was eventful as the Shanghai Composite index retraced 38% of its
advance from March lows, which triggered similar weakness on Asian
bourses. However the S&P500, the Dow Jones Industrial Average (DJIA)
and even crude oil prices managed to form new highs for the year. Crude oil
price movement is the most telling, in our opinion. The commodity is the
typically the last to rally and this suggests that equity markets are in a
terminal move of the advance from March lows. Our observations are as
follows:
a) Expect the Shanghai Composite to retrace at least 62% of the recent
decline.
b) The underlying tone for the DJIA is bullish and the index should head up
towards 10,000-10,100 and
c) Singapore’s FSSTI fell short of over 2,480-2,485 price objective and
bottomed out at 2,520 instead, which was a 38% retracement from an
earlier upswing. This leads to the conclusion that the pullback is very
likely a wave iv move. A final wave v of 5, which should bring the index
marginally above 2,700 towards 2,730. Expect offshore and marine
(O&M) and plantation stocks as well as S-shares to come into play over
the next two weeks. Banking stocks could potentially diverge by not
forming new highs.
We recommend trimming long positions over the next two weeks, especially
as the index heads above 2,650.