Daily Market Outlook for 21-Oct-2011

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STI continued its retracement towards 2680 level yesterday. It had a flat opening before sellers start to sell into strength. However, the selling action was thin and lack of strength, which caused STI slide gradually during the day. There are still no sign of panic selling yesterday. STI hit a low of 2685 before bouncing off and close at 2694 level. Last night the DJI closed slightly positive at 37pts up, ranging from negative to positive region during the night. Will STI be able to pick up some positive vibes from the US market today? Will the coming weekend prevent traders from entering the market?              
              
STI closed with a black candle yesterday which signifies it bearishness during the day. This black candle is now trading close to the 2680 support level and the 20ma line. Therefore, there is a possibility of the support holding if STI closes with a white candle and holding above 2680 today. The short term indicators were indicating bearish indication despite STI trading closer to the support level. This means that there is now clear indication from the indicators that this support will be holding. Therefore, one should wait for clear signs of 2680 support to be holding before we can conclude that the retracement has ended. If STI fails to hold above 2680 support level, then we should be expecting STI to be heading towards the next support of 2600 level.              
              
The banks continue to show weakness in price and retraced to a lower level yesterday. The immediate support level of UOB fails to hold yesterday and it is heading towards another level of support. Its possible higher low formation could be compromised already. DBS and Ocbc which have been trading above 20ma failed to hold above 20ma yesterday. This can indicate that they might experience further weakness. The offshore also continue their retracement yesterday as there is lack of bullish catalyst for them to trade higher. Kepcorp erased its gains that were achieved on Wednesday when it closed around Tuesday’s closing price. Sembcorp and Sembmar continued to retrace and they have now tested the 50ma support level.               
              
The properties were experiencing some selling pressure yesterday with exception of F&N. F&N’s volatiles price action has caused it to test 20ma support during the day and it rebounded strong back to the 200ma line which F&N finds resistance for the past few days. This price action would mean that F&N’s underlying momentum could be bullish. The rest of the properties continued their retracement and were unsure of where their support level will be. The commodities were generally bearish yesterday as they continue to retrace after their high formation. They continued to seek for their best support level to rebound as they are not showing any clear sign of rebound yet. Noble grp has reached its support level of 1.38 and might be possibly be holding there. Failure to hold at this level would mean a deeper retracement.                
              
In conclusion, STI is continuing its slow retracement to towards its support level of 2680. However, as STI trading close to its support level of 2680, some buyers might come into the market earlier to push the price up. Give that DJI had a positive closing; it might attract people to go long in the early trading hours. However, selling pressure might set in during the closing period as the market might still have some room to retrace. The properties and commodities might drag the index down as they have not found a strong foothold in their support levels. On the other hand, offshore and banks might provide the market with some support. Henceforth, it is more likely that STI might end the day flat with tight trading range.                 
              
Long traders can now start looking for counters that are trading at their support level to trigger a long position. The key is to watch for white candle formation and good indication of uptrend formation. Shortist on the other hand should start considering clearing out their short positions as the risk of rebound is getting higher. Adding new short positions now is consider a risky move and should be avoided.