Market Outlook for 4-Nov-2011

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After a sharp rally on Wednesday, STI failed to continue its bullishness yesterday and gapped down upon the opening bell. STI continually tried to break 2790 support level during the day but it failed to do so. Traders came into the market to bargain whenever STI trades below 2790 level, causing STI to stay above 2790 level during the day. Positive Europe opening also helped STI to close higher than its opening price and thus, ending at 2810 level. Despite such market actions during the day, the trading volume was weak. Last night DJI ended 208 pts higher as market confidence starts to gain again. Will STI be able to rebound off this support level of 2790 today? Will the uptrend be sustainable?              
              
STI closed with a small white candle with lower shadow yesterday. Despite the gap down yesterday, many might think that STI is having a bearish day as the price level drops lower. However, the white candle signifies that STI is encountering a bullish trading day. Its lower shadow formation also indicates that there is buying strength during the day. Furthermore, closing above 2790 support level shows that this support level is a firm one and it is likely to continue holding. The short term indicators, on the other hand, are still showing bearish momentum, but the bearish momentum is getting weaker as the stochastic lines are getting narrower. If STI is to trade higher than yesterday’s high, bullish signal might be triggered for both MacD histogram and Stochastic. While, downside support will remain at 2790 or the 20 & 50ma lines.              
              
After the earnings reports by the banks, weak earnings results caused UOB and Ocbc to trade lower yesterday. Despite dropping lower, these 2 banks managed to close above their opening price and ended with a white candle. UOB formed a hammer formation with a very long lower shadow. This shows that UOB is very likely to hold its support level. The offshore managed to stay above the 20ma line yesterday despite selling pressure during the day. All of the 3 offshore counters managed to end their day with a long white candle and this implies that their 20ma support are holding well and they have a good chance of rebounding to a higher level.                
              
The properties did not confirm their bullish reversal signal yesterday and ended up lower. The properties were unlike the rest of the sectors are they were unable to close with a white candle. However, they managed to form lower shadows for their candles and this could imply that their support levels are holding. Hence, there is still chance for them to rebound of their support levels. The commodities managed to stay above their support levels yesterday and mostly ended at or above their opening prices. These closing indicate that they still stand a chance of rebounding and head for a higher level. Their support level should hold well for today.              
              
In conclusion, although there is no confirmation for the bullish reversal formation, STI might still have chance to rebound at current level. Support level at 2790 has been proven to be a strong level as it closed with a white candle yesterday. Most of the sectors were also holding well at their support levels and indications of rebounding off their support level are high right now. With a strong closing by DJI last night, STI will stand a good chance of rebounding of its support level today and head towards its immediate resistance level of 2900 for the next few trading days.                  
              
Opportunities for long traders are here because the market is having good setups for long positions. Entry price range can be established for today and long positions can be entered as long as it still offers good risk rewards. On the other hand, Shortists have to avoid shorting the market and if they have short positions, it will be better to close the short positions. Patience is needed to wait for the next resistance level to do a counter trend short position.