Market Outlook for 10/5/2011

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STI reacted positively to the election results yesterday which the market is trying to adjust itself to the pre-election prices. The strong surges of 37 pts upwards lead STI to close above the strong resistance level of 3120. As pointed out yesterday, there are still multiple levels of Moving Average resistance levels to tackle. It is important for STI to clear this Moving Average resistance in order to have a good chance to turn itself back to up trend. Currently, it is still right below 20ma which is now at 3150 level. Will the market continue to go higher and test 20ma today?

STI formed a long white candle with little upper shadow yesterday. This indicates that the bulls are in play and it is strong. However, it might have encountered some resistance as upper shadow is being formed. The white candle might have broken the 100ma line but it could be a possible whipsaw, because the volume was not strong. The indicators are gaining bullishness as MacD Histogram and Stochastic are triggering bullish signals. This is a good sign as this would mean that STI might still have strength to propel higher today. Due to the formation of upper shadow, it could indicate that sellers are starting to clear their holdings. Hence, upside for today could be capped at 20ma which is 3150 level.

The banks had a good start yesterday and maintained its bullishness yesterday. Ocbc and DBS had started to trigger bullish signals in their indicators and could have strength to move higher today. However, their MA resistance is pretty near and upside could be capped by those MA lines. UOB showed the obvious on how 20ma can be a strong resistance. It ends up with a white inverted hammer showing that it failed to break 20ma yesterday. The offshore was surprisingly strong as the oil price had a rebound. They are now trading very close to the 20ma line and could have a possibility of being resisted by that line. If the offshore are to break the 20ma line today, chances of going back to uptrend would be greatly increased.

The properties had successfully confirmed its bullish reversal formation yesterday except for Capitaland. However, they are trading downtrend and could be resisted by the support turn resistance level which they had broken recently. Indicators had also turned bullish; hence, this might give them strength to break their immediate resistance levels. The commodities were the strongest of all as commodities price attempted a rebound. Straits Asia had benefited the most as the price surged more than 5% within a day. The rest of the commodities, excluding Straits Asia, look ready to continue its bullish strength. They could surge towards to their respective support turn resistance levels. Shorting opportunity for them could be near as they are clearly downtrend.

In conclusion, the strong surge by STI yesterday had triggered multiple sectors with bullish signals. Hence, this rebound is most likely to continue today. However, as there is still risk of downtrend formation, there is still a possibility that STI would form a lower high is few days. Therefore, I am expecting STI to test 20ma at 3150 level today and might struggle to overcome this level today. It is quite unlikely that STI would form a bearish reversal formation today. Since the upside could be limited, it would be wise not to chase prices today on the Long side unless the price still yields good risk and reward with clear bullish indication. If not, those whom had long positions; it is time to get ready to reduce long position once bearish signs are seen in the market. For Shortist, prices are getting closer to resistance levels. Be patient for a little while was clear bearish signs should be seen before any action should be done.