Daily Market Outlook for 11-Aug-2011

After Singapore’s national day holiday, STI decided to do a “catch down” for the trading day that it had missed. Despite strong closing from the US market the previous night, STI only managed to open strongly in the morning but it failed to close higher. During the day, regional market were trading positively, however, STI seems to be unable to follow the regional sentiment and trades with its mind of its own. Trading volume was significantly higher as more sellers were rushing into the market to exit their positions. This could be due to force selling by the margin traders. It is still unclear how low STI can head towards. Will STI be able recover its lost grounds today?

STI formed a long black candle that closed lower than the previous day’s low. STI’s support level of 2880 failed to hold yesterday. Hence, it would be heading towards the next possible support level of 2800. Looking at the indicators, there are still no signs of bullishness and is likely to continue lower. However, a positive note is that the indicators are indicating an oversold situation and downside might be limited. Therefore, 2800 support level might be a possible support for STI. Market could also be heading for the worst. If 2800 level fails to hold, STI can even reach the next support level of 2740.

The banks continued their fall as they failed to find a good support to rebound. UOB in particular failed hold at its weekly support level. It broke that level with high volume and therefore it is likely to continue lower. The rest of the bank might eventually follow UOB’s movement for today. The offshore were the biggest contributor to STI’s drop yesterday as they traded at least 6% lower. Sembmar got the biggest drop in the sector. The offshore drastic drop could be due to the sharp fall in oil prices. They might continue till they find a good support level to bounce off from.

The properties failed to end its day as a bullish reversal although it had attempted to do so yesterday. They still managed to close higher than its previous low. However, there are still no clues of whether they will still continue to hold their current level. As oil prices experienced sharp fail recently, it is no doubt that the commodities will have an impact. Similar to the offshore sector, the commodities traded sharply lower yesterday. Wilmar and Golden agri failed to bounce off their key support level and broke with significant volume. Further downside is to be expected for them.

In conclusion, with no signs of bullishness or bargain hunters coming into the market, sellers were panicking to sell whenever there is a buyer in the market. Most panic selling was seen in the offshore sector as the market reacts to the sharp decline in oil prices. It is still uncertain of when this selling would end but technically, the immediate support level of 2800 might hold the market. In the worst case situation, STI might even head towards 2740 level. Therefore, in such bearish situation, long traders will definitely be fearful of current situation and will be not be confident to go long when market comes to support level. Hence, it will be safer to stay sidelines for the moment until a bullish reversal signal is being formed. Shortist, however, will be laughing to the bank as it seems that the drop is forever. But Shortist has to be reminded not to be too greedy and enter short positions to chase the market. It is important to watch out for a bullish reversal formation so as to avoid any drastic rebound which could be seen.