Market Outlook for 3/5/2011

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As the month of April draws to a close, STI close 5 pts down despite the long weekend. Strong selling was not seen in the market and was lack of trading actively as traders are acting very cautiously amidst of the Singapore election. During the holiday on Monday, US announced that the world’s most wanted man, Osama Bin Lama, was killed in the gunfight. This brought some cheers to the US market but unfortunately, experts concluded that the terrorist’s death would most likely create more terrorist incident in the short term. The US market reacted and ended slightly red last night. Will this news bring cheers to Singapore market? Or will DJI’s closing drag Singapore market down further?

STI continued to form a black candle on Friday indicating that the market is still struggling to stay bullish. However, this time round, it is trading very close to the 20ma line which is now around 3170 level. Slightly longer lower shadow was also formed on Friday indicating of its refusal to break the 20ma level. Looking at the indicators, they still remained bearish and is yet to show sign bullishness yet. The MacD has started to flatten out which indicates that the trend might be starting to form sideways. The histogram is also starting to form bearish divergence. The Bollinger band continued to squeeze and any form of breakout might be happening soon. Hence, STI might still be slightly bearish and breaking of 20ma would sign the danger of sustaining its uptrend. The key level to confirm that it is breaking for a downtrend would be 100ma which is around 3135 level right now.

The banks were lack of buying interest on Friday despite good quarterly results from DBS. DBS ended slightly up but it failed to close as a white candle. However, it had formed long lower shadow indicating it support is holding. UOB, on the other hand, had a deep drop on Friday but this drop had brought it closer to the 20ma line. The offshore sector would be one of the sectors that might suffer an impact of the death of the terrorist leader. Oil price had slide upon the news of the death. Based on Friday’s movement, Kepcorp and Sembmar had confirmed their higher high as it had ended lower than the previous day’s closing price. This would mean that they might be heading towards the 20ma again. Do also take note that they are forming clear bearish divergence and there could be a chance that 20ma might not hold.

The properties continued with the sideways movement by having a slight rebound on Friday. Most of them did not manage to break their sideways support level and held there. Most likely, they might continue their sideways today. Lastly, the other oil related sector would be the commodities sector. On Friday, they continued to show its bearishness by retreating lower. Indoagri was the worst of as it seems to break for a lower low. This break was not very convincing as the volume was not very high. However, we cannot rule out that Indoagri might be continuing to head much lower today.

In conclusion, based on the readings and observations in the chart, STI might be more bearish biased. Leading its drop could be coming from the offshore and the commodities sector. Although the death of the terrorist leader is good news, I am suspecting that market had all along forgotten the impact of Osama and would have most likely price the news in. However, this might bring some easing of tension in Middle East countries and could impact the oil price. Oil price might encounter weakness and retreat further. Offshore and commodities sector might suffer due to the drop in oil prices. Therefore, STI might suffer a sell off and 20ma support level might be broken. The last line of defence for STI would be the 100ma line at 3135 level. This shall be the key level to watch on whether STI’s uptrend would be sustained. The strategy now is to carry on staying cautious on the long direction. Holders of long positions should be actively seeking to reduce their long position to protect their profits or even capital.