Daily Market Outlook for 13-Sep-2011

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STI opened the week with a strong gap down movement yesterday. It opened around 60pts down in reaction to last week’s US market’s weak closing. The morning session was lack of selling pressure but right after lunch, selling pressure was seen which caused STI to drop further by around 20pts. Hence, STI ended up 81pts lower than the previous day. Traders were now confused on whether to go long or short as volatility starts to creep in. Last night, US market closes with a positive note; around 69 points up due to strength in Bank of America. Will STI regain some of its losses today? Is it time to go long?              
              
STI ended with a black candle which gapped down after a confirmation of the bearish reversal pattern. Based on the recent weekly outlook, STI is expected not to hold at 2800 support level and test 2740 support. STI indeed met the expectations. Currently, 2740 level should be a good support level for STI and might cause a rebound for STI to close the gap that is formed yesterday. However, the short term indicators were showing bearish signs which might prevent the rebound. Hence, there is also a chance that STI might not be able to hold its 2740 support level.                 
              
The banks failed to hold their respective lower low support yesterday and the support was broken with a gap down. Selling volume was quite significant which indicates that downtrend continuation for the banks is very likely. However, DJI’s strength last night was due to strength in the banks. This could create some positive note for the banks today. Therefore, the banks might be rebounding today but should be capped by their respective support turn resistance level or even the gap resistance level. The offshore threaten to break their lower low support level yesterday and managed to close slightly higher than their recent low. If they fail to hold their support levels today, move downside is to be expected for the offshore. Similar to the banks, as they had a gap down yesterday, there could be a good chance that the offshore would rebound towards the gap resistance before it can break its support levels.              
              
The properties also suffered a strong gap down yesterday. However, the properties’ selling volume was not as significant as the rest of the sectors. This could be due to its sideways formation that it has been trading in for the past few weeks. Citydev is trading in an obvious sideways range of 9.70 – 10.50 and Kepland between 2.84 – 3.07 levels. Their range support level will be the key to determine if they will be continuing their downtrend movement, but for now, they are most likely to rebound from their support levels. The commodities also suffered selling pressure yesterday. One significant observation is that they still managed to end the day by closing at or slightly above the 20ma line. Especially Wilmar; it was trading below 20ma through the day but before market closes, buyers flock into the counter and push the price above 20ma. Therefore, we can conclude that the commodities might have some bullish strength in them. 20ma will their key support for today.              
              
In conclusion, STI’s drop yesterday was a broad-based one. Most of the components suffered a gap down yesterday but they managed to close slightly above their immediate support level. As there is a good chance for the support level to hold due to positive note from the US market last night. One can expect STI to rebound for a gap covering between 2770 – 2823 levels. In between the gap resistance, 2800 level which was the support yesterday will now turn into a possible resistance level. Therefore, any rebound should be capped by this 2800 resistance level. As slight rebound is expected, long traders might be excited to enter a long trade. However, be warned that this rebound is likely to be a short one and do expect to take profit quickly. Personally, I would rather prefer to avoid going long now as the downside risk is still high. Shorting would be preferred as the general trend is downtrend. This slight rebound will be a good opportunity for Shortist to enter some short positions.