Market Outlook for 6/5/2011

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STI continued to creep down lower yesterday as it struggled to maintain a foothold at 200ma level. It ended the day around 3 pts lower than the previous day’s closing. HSI and DJI also experienced a selloff yesterday which might worsen today market direction. As stated yesterday, 50ma level of 3080 would be last line of defence before we would conclude that STI is going downtrend. Will 3080 level break today?

STI formed a star formation yesterday which indicates that STI is indecisive of it direction. This formation could mean that STI is either taking a short break for further downside movement or might be reversing. The indicators however did not support that the reversal is ready and bearish movement might continue. Therefore, 3080 level will be the key level to watch out for today. Breaking this level would indicate that STI would be going towards the next support of 3040 level.

The banks tried to reverse its losses yesterday as most of them close as a white candle except DBS. DBS yesterday broke the important 20ma line and is now heading towards the 100ma level at 14.60. Downside movement is still likely to be seen for DBS. The offshore carried on retracing further yesterday. However, Sembcorp and Sembmar start to show signs of reversal but their attempt might be restricted by the 20ma level.

The properties started to get much clearer direction. Most of them are clearly forming downtrend and is likely to head lower. The only exception is F&N which I would be watching for it downside breakout. Lastly, the commodities generally are still showing signs of weakness. However, Indoagri and Golden Agri are starting to show fatigue in the downside.

“In conclusion, STI is now trading at a very critical point and could be uncertain for today. Downside risk is still there but starting to show signs of fatigue. Various sectors seem to be more poise for downside and there could be a higher chance that STI will be going downwards. 3080 level could be tested today and a clear lower low for STI might be formed. As election results is announcing on Saturday, participants of the market might also remain cautious and might be avoiding supporting the market. The strategy of staying sideline still remains and cutting losses might be slightly late. Shortist should carry on remaining patient but can adopt breakout strategy if the support of 3080 level breaks.