Daily Market Outlook for 19/5/2011

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After the holiday, STI manages to avoid the selling sentiment from DJI’s bearish movement and ended around 4 pts higher. Early in the day, STI did react to DJI’s bearish movement but it was immediately being shrugged off by the strong performance of HSI. Throughout the day, the trading volume was very thin and this signifies that the traders are not very willing to commit positions in the market. Furthermore, before the market closes, the new cabinet for the parliament of Singapore was being announced. There were significant changes to the cabinet but there were no much reactions from the market. Would the market start to digest the cabinet changes and start reacting today?

The candle that was formed for STI is a small white candle with longer lower shadow. In conjunction with the 100ma, the lower shadow signifies that the market refuse to break the 100ma and would mean that the support level is holding. Further confirmation of the strength of this 100ma support comes from the white candle formation. Although the indicators did not show any clear signs of bullishness for now, there could still be bullish strength in the short term. However, as pointed out yesterday, 20ma at 3150 level could still provide resistance to the market. Uptrend would only have a higher chance if STI breaks 3180 level. Sideways trading range should still be expected between 3100 – 3150 levels.

The banks had shown a remarkable recovery yesterday as they bouncing off strong from their respective support level. However, a point to note is that yesterday’s movement had yet to break their previous high and is they are now close to their respective resistance again. There might be a slight chance that they could break the resistance level as their indicators are starting to turn bullish. The offshore managed to hold their support well yesterday despite the chance of breaking it yesterday. Rebound could be expected for Kepcorp and Sembcorp as they are now sitting exactly on the 50ma line. However, their upside could be capped by the 20ma line.

“The properties had lack of trading interest yesterday as they hovered at their respective support level. F &N in particular is now within its cluster of MA levels and is sitting nicely at the 50 & 200ma line. If it breaks this level, more downside could be expected for it. As expected yesterday, the commodities were one for the contributor for the bullish strength in the market. Strong bullish performance was seen in Wilmar and Straits Asia yesterday. Both of them might still have strengths to continue as they are seen as uptrend. More bullish strength could be expected in this sector. ”

In conclusion, the STI is expected to have some short term bullishness today as the candle has shown signs of it refusing to trade below 100ma. Upside could be capped at 20ma level (3150) today as there is no additional catalyst to surge higher based on the indicators. However, there is 1 key sector to watch today as it could help STI to break the 3150. The banking sector would be the key. If the banking sector breaks their resistance level today, we might eventually see STI to head towards 3180. The commodities would continue to hold the market at its support level as they are yet to show signs of bullish fatigue. Trading interest for today might still be low as traders are still cautious about the market direction. The strategy for today might have an abrupt change. Long position traders might see this as an opportunity to look out for long positions to enter. However, cautious mind set should still be set as the market’s trend is still uncertain. For Shortist, short positions should have been reduced since yesterday and therefore, it is now time to be alert to see if the counters hit their respective cut loss level.