Daily Market Outlook for 9/6/2011

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STI struggled to maintain its gains that were accumulated the previous day. It had closed 12 pts down. Trading activities were lacking as traders were unsure of the direction of the market is going today take. With the US market weak closing the previous day, STI decided to follow suit. Key support remains at 3080 level while 3120 minor resistance might continue. Will this sentiment continue today? Which sector would carry on to give STI strength for breaking 3120 resistance level?

A small black candle was formed yesterday. It can be known as a black star which signifies that the bear is weak and is uncertain of whether to go down further. This formation also indicates that the market is refusing to break the 3080 support level. The indicators did continue to be bearish but there are signs that this bearish movement is getting weaker. With this observations, 3080 support level should carry on to hold today and there could be possibility that the bullish might be coming back to hold this support well. However, 3120 minor resistance is unlikely to crack today. If it cracked, bullish signal would be triggered and upside target would be 3180 level.

The banks are still holding well at their support level as they threaten to break it during the day. Uob tested the 50ma and managed to bounce of the 50ma level. Ocbc, however, struggled to stay above 200ma line but it is still at its horizontal support level. If Ocbc is to break it horizontal support level today, more selling is to be expected. The offshore were lack of trading action yesterday as most of them closed as a doji with exception of Kepcorp. Kepcorp gapped down and closed as a small black candle. As it is not at its support level, downside could continue.

The properties were bearish yesterday as they continued their bearish movement. F&N and Kepland continued to trade lower as they had yet to reach their support level. Slightly more downside is expected for these 2 counters. The commodities were trading fairly mixed yesterday as some of them were bearish while some were bullish. Wilmar, Golden agri, Olam and Straits Asia were gaining bullish strength yesterday as they could be reversing their losses. Olam in particular is trying to close up its gap after it announcement to raise more cash for its business.

“In conclusion, despite having a bearish day yesterday, the bearish sentiment is pretty weak as various sectors are trading in a mixed direction. Bullish strength will most likely come from sectors like the banks and commodities as they are trading close to their respective support levels. Offshore and properties might create a drag as they are still quite a distance away from their support levels. Hence, in order for STI to convincingly break the 3120 level, strengths must be seen in the properties and offshore sector. Therefore, I am expecting today to be a day of lack of trading actions as most of the sectors are struggling to find their foothold at their respective support level. The range for the day would likely to be between 3080 – 3120 levels. The strategy of staying sidelines still remains while risk takers might want to consider doing a risky and quick trade for the expected short rebound. ”