Market Outlook for 07/03/2011

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Lst friday, STI manages to gap up above the 200ma and stays above it. There were positive sentiment at first but the bullishness was quick to fizzle out as sellers start to close their position to avoid the weekend risk. This action also shows that 20ma stayed as a resistance level. However, friday’s closing also implied that the whole week last week was a bullish week despite signs of selling pressure during the week. Hence, this action formed a reversal candle in the weekly chart. Would this week carry on to stay bullish or whatever actions last week is merely a technical rebound?              
              
The daily chart’s candle on friday shows a shooting star a like candle with it upper shadow penetrating the 20ma. This indicates that the STI fails to break 20ma as resistance. Furthermore, the day ends with a black candle. These are signs of bearishness. On top of the bearishness from the candles, the indicators also started to form bearish indication which further enforces the chance of market retracing for the next few days. However, we must also note that there is still a possibility that the market could be supported by the 200ma (3050 level) as it did not close lower than 200ma. Of course, as noted last week, the last line for defense for STI to have the chance to turn up trend would be 3000 level. Hencefore, if the STI decides to confirm the bearish signs and breaks 3000 level, we can conclude tha the downtrend might continue as recent action would turn out to form a lower high.              
              
On the positive perspective, STI’s slight bullish divergence is still in play. There is still a slight chance of trend reversal at this point in time. Its weekly chart too, indicates a bullish piercing pattern. Hence, this week is an important week to determine whether if this weekly bullishness would be confirmed. In order to confirm it, it must trade and close higher than 3083 level. If that happens, we should be able to see STI to test the major resistance level of 3120 level.              
              
The banking sector remains directionless as it attempts to trade higher slightly. But their bullish action was forced southwards before the market closes. UOB in particular had a very strong start but eventually hit a strong resistance level and it retrace there after. Hence, the banking sector might still see some mixed trading sentiment. The offshore sector carried on their bullishness and attempted to break their previous high, particularly Sembcorp and Kepcorp. This is a good sign as their trend might reverse to uptrend and currently it is interpreted as sideways. Sembmar however is surprisingly stronger than the rest with a higher high being shown. This sector could have some selling pressure this week but it selling pressure should be capped at their 20ma support level.              
              
The property sector enjoyed a very good rebound last week and most of them are currently near or at the 20ma level. Kepland and Capitaland were struggling to break 20ma level but eventually their effort was dragged down by the selling sentiment of friday. Citydev which is particular strong last week also starts to form bearish candle indicating that it might be retracing towards 20ma. Lastly the commodities are also fairly week last friday as their attempt to trade higher fails. Therefore, there could be a chance that they would be retracing this week.              
              
In conclusion, despite the bullishness on friday, the bullishness was quick to be surpressed by the bears. Downside risk is still there but it seems to get weaker and weaker as the underlying bull is getting stronger. I suspect that the market would continue to struggle for this few days in the form of sideway movements. As for today, STI could possibily retrace and test 200ma and stay there till the market decides its direction for the next few days. Expectation for this week should be more on the bearish side as indicated by the short term indicators but STI’s 3000 level would be the key level to determine whether the bear would be a strong one. However, on the bullish note, as long as STI stays above 3000 or 3050 level, it would still have a chance to turn uptrend. Hencefore, the strategy for today would be similar to last week which is to be cautious in the trade. Shorting seems to be the correct strategy right now but it must be done cautiously as the downside could be very limited right now. Risk takers might want to carry on to take a little bit of position on the long side as the reward could be more fruitful than shorting for now.