Daily Market Outlook for 23-Sep-2011

*Disclaimer: This material is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to purchase or sell the product mentioned. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks. If there is any questions, please contact me (Jay)              
              
The outcome of the FOMC took a great hit on the STI yesterday. Lack of new tools to stimulate the possible recession was cited as the main reason for the selloff. Confidence was shaken as traders and investors sell off the market in anticipation of further selloff. STI opened with a strong gap down of 43 pts reacting to the news. 2740 support level falls to hold and this trigger more selling causing STI to close at 2720 level; closed 71 pts down. Situation is going to get worse as Europe closed around 4% down yesterday while the US market closed around 3% down. This will bound to trigger more sell off in STI today. How low can STI go today?              
              
STI ended its days with a long black candle. Although it opened with a gap down, there is a negligible gap resistance that was form. But most importantly, the immediate support of 2740 was breached and this will indicates that STI will be heading to test 2680 support level. Short term indicators triggered bearish signal after the big drop yesterday. Therefore, more selling momentum is to be expected today. The new immediate support level of 2680 will be tested and might even threaten to be broken. If 2680 fails to hold as support, it will also mean that STI’s trend will be downtrend after 2 months worth of consolidation. The next support level would be 2650 level.              
              
The banks were not spared by the bearish sentiment as they are normally the first to be affected by any economic recession. Strong gap down was seen in the 3 banks causing them to confirm a lower high formation. They are now currently bracing for a continuation of downtrend once their immediate support level are broken. The offshore continues their bearish streak with a gap down yesterday. Sembcorp broke its immediate support level yesterday and is likely to head towards next support of 3.59. Kepcorp and Sembmar might follow suit today.              
              
The properties fail to continue its winning streak and instead returned their gains for the past few days. Capitaland, Citydev and F&N failed to stay above 20ma as they closed below the level. Their chances of possible uptrend formation have been destroyed by yesterday’s movement. Kepland failed to hold its major support at 2.85 which confirmed its descending triangle formation. It is likely to head towards the immediate support of 2.68. The commodities dropped in a similar fashion like the properties. Most of them failed to hold their 20ma support and their uptrend formation is now compromised. Sakari had the worst hit yesterday as it dropped 7.8% within a day. It is now likely to head towards 2.30 support level.              
              
In conclusion, STI’s past few days of rally were, indeed, a bull trap. Bullish trader whom thought they had bought at bargain, were now wondering if they can be more patient. Traders whom entered positions in the properties and commodities suffered the most as they thought that they were forming uptrend. Going forward, STI is now trading close to the important 2680 support level. If 2680 support fails to hold, STI’s possible downtrend will be confirmed and will be heading towards the next support of 2650 level. With one of the worst drop in the US market last night, STI’s chances of holding at 2680 support level might be minimal. Long traders should still be avoiding the market until it reaches a good support level. Shortist might want to short based on breakout but downside potential is getting lesser. Hence, Shortist should be focusing of taking partial profit once the target is met or market use of any rebound as an opportunity to enter short positions.