Daily Market Outlook for 19-Jul-2011

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STI ended 5 points down despite DJI’s positive closing last Friday. The day was a volatile one as the bulls and bears struggled with each other to fight for their foothold in the market. The volatility level was high as it swings from positive to negative region throughout the day. Trading volume was lacking as market participants continue to stay sideline. DJI closed in the negative region last night as concerns of US debt policy decision draws closer. Will STI suffering more selling pressure today? Will STI continue to hold its support level?

STI ended the day yesterday with a black spinning top pattern. This pattern signifies that STI is very indecisive of its direction. It is being observed that STI is now trading clearly below the 20ma line as it failed to break the 20ma resistance during the day. Now, 20ma, 50ma and 100ma are now trading close to each other at around 3100 level. 3100 level could not be a strong resistance level for STI to break. The short term indicators remains mixed as Histogram continue to shows bearish momentum while Stochastic continues to show bullish one. Therefore, 3100 level is now the key resistance level for STI to tackle before we can see a significant rebound.

The banks attempted to rebound yesterday by trading higher but traders made use of the opportunity to sell, causing the banks to close flat or lower. However, it is obviously seen that 20ma are still holding well for the banks. DBS might be interesting to monitor as it failed to break the 20ma and 50ma support line. Chances of higher low formation can still be expected. The offshore continued to struggle to stay at the positive sign yesterday with exceptions from Sembmar. Sembmar continued to gain strength as it had reported new contract orders last week. This brought bullishness and confidence that their earnings can be sustainable. However, from the charts, Sembmar might be facing resistance from the 50ma and 100ma line which is ranging from 5.32 – 5.37.

The properties were the main culprit of dragging the STI down. Citydev contributed most of the selling pressure yesterday as it failed to hold at 20ma support. Its bearish action had eliminated Citydev’s chance of uptrend formation as it had tested the previous higher low. The commodities were fairly mixed as different counters have their own direction. Wilmar was very bullish yesterday as it managed to break the 200ma as resistance but it had yet to break its previous high. On the other hand, Noble grp and Olam continued to trade lower as they failed to hold their key support levels. Noble grp and Olam which has been downtrend is more likely to continue to go lower today.

In conclusion, STI might continue to trade indecisively for today as there are still many uncertainties in the market. These uncertainties are going to put off more traders as they would rather choose the cautious approach. Unless, there are positive news to tackle the current uncertainties, STI will still continue to be headless. Upside is now limited by the strong resistance at 3100 level making it harder to rebound. If there is positive news, 3100 level will most likely be broken and a higher low can still be formed. The sectors that could contribute to the rebound will most likely be the banks or offshore. Properties and commodities might continue to be the main drag for the market today as they have yet to form a clear support. Trading must be very selective as there is no clear direction yet. Chances of bullish rebound are still there but the bullish strength is getting weaker. Long traders should be wary of the limited upside and might be wise to take partial profits when resistance level is reached. Shortist might want to continue to stay sidelines until a clear rebound is seen.