Daily Market Outlook for 2-Nov-2011

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Strong selling pressure continues for STI as Greek’s PM seeks for referendum for the bailout package of their country’s debt. The comment by Greek’s PM sparks concerns on whether the Greeks will still be able to pull through their debt crisis despite their talks with the EU last week. Therefore, the whole market, especially the Europe market, went tumbling down. STI closed a whooping 66pts down yesterday and ended at 2789 level; this left people wondering whether there was a sharp rally last week. Last night, the DJI dropped 279pts lower as the Europe market extend their losses. STI had already reached the expected support level of 2790 level but will the support level be able to hold today? If it fails to hold, what will be the next support level?              
              
STI started its day with a gap down and a long black candle was formed. Upper shadow was formed and it indicates that the market did attempt to close the gap that was formed in the morning. The short term indicators which had their bearish signal being triggered yesterday were confirmed. Bearish momentum is currently in the market and there are still no signs of weakness in it. On the positive side, both RSI and Stochastic are now out of the overbought region and it could be a good retracement for continuation of uptrend. However, as for today, selling pressure can continue to persist until weakness is being seen in the indicators. The current support level of 2790 might be in danger of holding. If 2790 support level fails to hold today, STI would be seeking 2740 as support which has multiple confluences of MA lines and gap support.                
              
The banks plummet yesterday after the comments by the Greek’s PM the previous night. They dropped more than 3% as there is no reason for buyer to buy them. UOB is the worst of the lot as it fails to hold above 20ma and even broke the recent low. It might be heading towards its next support at around 16.00. The rest of the banks are at 20ma and might threaten to break it too. The offshore continues their retracement but they retraced sharply. They have broken the resistance turn support level and are now heading towards their respective 20 & 50ma line. There is a good chance that they might find a support at the MA lines.               
              
The properties followed the general market and retraced strongly. Citydev which had a strong closing on the previous day failed to trade higher and dropped very drastically yesterday. Citydev ended its day with a whopping 6.5% drop and it is now trading below 200ma. This drop has wiped out all the 3 days gains it had achieved. The commodities also retraced strongly causing them to return the gains they have achieved last week. This retracement has leaded them to their respective support levels and with the confluence of the respective MA lines, they could be holding well. Indoagri & Noble grp are trading at or close to the 20 & 50ma lines. These 2 lines can be a strong supported for them and might lead a higher low formation here.              
              
In conclusion, the Greek’s PM comments has indeed shocked the whole market leading all the sectors to retrace sharply and majority of them returned their gains from last week. Selling pressure was a broad-based one and it can persist till today. However, numerous counters are now trading very close to the MA support lines and these MA lines can deliver strong support for the market. Although the indicators were still signalling bearish momentum, the market might struggle to break these MA lines today. Therefore, STI’s support at 2740 level is not expected to be broken so easily and the market has a good chance of rebounding of this support level. The key to a rebound right now is a formation of a bullish reversal candle.                  
              
The sharp drop yesterday attracted many long traders to dip their fingers into the market and at the same time fear of further downside has prevented some to take long positions. Long traders must be aware that there are still no clear signs of short term bullish indication in the market and therefore, they must be patient to wait for one to be formed. As market is coming to a major support level, long traders should watch out for bullish reversal formation before entering long positions. Shortists on the other hand are enjoying their counter trend short positions. Shortists must not let greed to take control and forget that the market is still in uptrend despite the drastic drop. Shortists should take this opportunity to take at least partial profit, if not, all the profits when there are signs of bullish reversal.