Daily Market Outlook for 25-Aug-2011

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STI ended the day red despite strong closing by DJI the previous night. STI ended 45 pts down; wiping away all the previous day’s gains. Yesterday’s bearish sentiment was caused by concerns of Asia’s economy after Japan decided to implement measures to help boost the country’s economy. Asian market swung from green to red territory quickly after news from Japan. Strong Europe opening did not help to boost the sentiment for STI but instead STI fell further before closing. However, last night, DJI manages to reverse from the negative territory and ended up 143 pts up. This might reversal STI’s losses yesterday. Will STI be able to regain back 45 pts of losses yesterday?              
              
STI closed as a long black candle which engulfs the previous day’s white candle. It can be seen as a bearish engulfing formation but the rebound for the past few days was not significant enough to be called as a bearish engulfing. Nevertheless, the candle formation yesterday display’s market’s bearishness and the downtrend is still intact. The indicators on the other hand were not showing bearishness. Instead, they are indicating that the underlying momentum is still bullish and might still have upside strength for the short term. Therefore, STI can continue to test the gap resistance and even 2800 resistance level for this few days.                
              
The banks failed to hold their recent low level yesterday as they were facing strong selling pressure. DBS suffered the largest drop yesterday as it is now going for a lower low. The price action of DBS even causes the indicators to trigger a sell signal, but it has now reach the support level of 12.90 which can limit its downside for today. The offshore failed to continue their rebound as oil prices retreated yesterday. Similar to the banks, the selling pressure caused them to break their recent low. Hence, do expect the offshore to slide further towards their respective support levels.              
              
The properties were unable to rebound further as bearish market sentiment sets in. Citydev’s price action yesterday confirmed the previous day’s hanging man formation. Lower high formation can be expected for Citydev to form this few days. F&N which enjoyed a very strong rebound the previous day failed to continue its bullishness and got resisted by 20ma. If F&N close lower today, it might have confirmed the continuation of its downtrend. The commodities failed to continue their rebound yesterday. Noble grp and Golden agri managed to close their gap resistance and might continue their downward movement.              
              
In conclusion, the selling yesterday was a broad based one. The banks and offshore were leading the drop and they broke their recent low levels. These 2 sectors would likely to continue to trade lower as they have confirmed their continuation of downtrend movement. These sectors would create downward pressure for STI this few days. However, as the US market ended up strongly despite expectation of it trading in the negative territory, STI might even rebound today. The possible rebound for today can be supported by the bullish short term indicator. Although rebound can be expected for STI today, its upside would still remain capped by the gap resistance levels. Traders might find frustration in the market as it goes neither way with extreme volatility. As the trend is downtrend, advantageous will still be on the short side. Long traders must exercise patience as the prices can look attractive to long right now. It will be wise not to long as the upside is limited. Any rebound can be a good opportunity to close long positions. Short on the other hand might be enticed to chase the downward movement. With expectation of rebound, it can be a good opportunity to look for shorting counters that are trading at resistance level.