Daily Market Outlook for 22-Sep-2011

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STI continued its rebound yesterday in anticipation of possible good outcome of the FOMC meeting and the Europe debt issues. STI did attempt to trade lower during the day but it was able to rebound back higher than its opening before the market closes. This bullish movement was surprising as the HSI and Europe market were trade negatively. However, STI just closes 10pts higher than the previous day which might not be a significant bullish move. Over the night, Fed Reserve announced its plans to restructure current short term debt to a longer term debt in anticipation of a risk in recession. This sparks a selloff in the US market causing it to plunge 283. STI will definitely be affected by the abrupt drop by US market night. How much will the news impact STI today?              
              
STI closed with a white candle with lower shadow yesterday. The candle closes exactly at the 20ma line which can imply that the resistance is holding. On the other hand, the lower shadow that is being formed indicates that the market refuses to drop lower and prices are holding on strongly. Hence, it is quite hard to determine who has an upper hand right now. Based on the indicators, bullish momentum is still shown but Stochastic is starting to show weakness and might even form a bearish crossover if the price closes lower today. Therefore, STI might be running more downside risk then upside. 20ma will likely be capping the upside movement for now while 2740 support level might restrict any downside movement. 2740 will be the key level to determine if STI will be heading towards 2680 support level.              
              
The banks attempted to continue its rebound but most of them were lack of strength to rebound. UOB had the strongest rebound as the rebound managed to push it to test 20ma resistance level again. Looking at the indicators of the various banks, they were forming bearish crossovers in the stochastic indicator. Therefore, do expect selling momentum to set in. The offshore trade in a flat range yesterday. They were lack of market actions as trading interest were not on the offshore. Kepcorp and Sembmar continues to trade closely to the 20ma resistance level. Any bearish movement for them will be threatening to break their major support levels.              
              
The properties again contributed significantly to STI strength yesterday. Capitaland and Citydev lead the bullish charge as they ignored the current market’s sentiment. However, F&N and Kepland were both struggling to keep up. Currently, only Kepland is still trading below 20ma. The commodities also contributed much of the gains yesterday. Olam and Wilmar lead the surge as they attempt to continue their possible bullish trend. However, they might be restricted by their immediate resistance level. Indoagri and Noble grp were still stuck in a sideways range which trades between 20 and 50ma.              
              
In conclusion, STI’s bullish strength yesterday was not a broad based one as only selective stocks were supporting the upside strength. The drop in US market overnight trade will definitely affect STI today. If STI was to trade lower today, its short term indicators would most likely trigger a bearish signal causing STI to turn into bearish momentum. Therefore, STI will likely test 2740 support level again. 2740 support level would be the key level to determine whether further downside will happen. If it breaks, STI will most likely head towards 2680 support. Long traders might find that it is a good opportunity to long at support level but it will not be a wise move as the indicators were indicating more possible bearish strength is to come. Hence, it will be wiser to avoid going long. Shortist might want to take this opportunity to wait for breakout of support. Once support level is broken with high volume, it can be a good entry point for shorts.