Daily Market Outlook for 6-Dec-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 are any questions, please contact me (Jay)              
              
STI started the week flat as the US market did not exhibit strong performance last Friday. STI closed at 2766 level which is down by 7pts. Trading volume was lacklustre as traders were uncertain of whether the price can go higher or retrace. Yesterday, Singapore announced their manufacturing index and it indicates a decline. This could have dampened the bullish mood in the market which caused the price to retreat. STI failed to close positively despite positive closing by the Asian market and positive opening of the Europe market. Last night, DJI closes 78pts higher but it did not maintain its bullish strength during its opening session. Will US market’s positive closing bring some bullish strength to STI?               
              
STI formed a small black candle with little lower shadow yesterday. This small candle indicates indecisiveness in the market and was uncertain of it direction. Black candle closing shows that there is some selling action during the day and this can prevent the prices from going higher. However, the formation of the lower shadow shows the reluctance of STI dropping below the 20ma line. This means that the underlying bullish sentiment is still in play which kept the support level from breaking. The MacD line is starting to form a crossover and might have been confirmed. If the MacD line goes above the 0 line, it would mean that STI’s downtrend might be compromised. The short term indicators were still showing bullish momentum and this might help STI to maintain its bullish underlying.               
              
The banks were trading mixed yesterday with some selling pressure seen. They continue to stay above 20ma yesterday. UOB formed a bearish reversal pattern yesterday after it failed to break its immediate resistance level. Its 20ma at 15.60 level is the key to determine whether the bearish reversal pattern is being confirmed. The offshores were generally trading flat as there is lack of catalyst for it to trade higher. Sembmar managed to break its resistance level yesterday but its breakout did not come with heavy volume. Hence, its breakout might not be sustainable and could be a whipsaw.              
              
The properties were trading mixed yesterday as they were indecisive on their directions. F&N showed bullish strength and closed higher; while, Citydev failed to trade higher and retraced towards its 20ma line again. Hence, the property sector might not be trading in correlation for now. The commodities were showing some bullish strength yesterday after they struggled to trade higher. Sakari was the leader of the pack as it traded higher. However, Sakari formed long upper shadow yesterday and it can be seen as a white shooting star. This indicates it limited upside and could retrace if it close lower today.                 
              
In conclusion, STI’s risk of continuing its downtrend has started to decline. However, this does not mean that STI have no chance of continuing its downtrend again. If STI is still trading below 2790 resistance level, lower high formation can still be formed. 2740 support level remains as a key to determine if STI can continue its downtrend. Hence, for today, STI is still likely to trade in the range of 2740 – 2790 level before it can decide on which direction to head to. Short term indications are still on the bullish side but this bullishness is starting to weaken. One should not be surprise if prices start to retrace because of its bearish candle that was formed yesterday.              
              
Long traders should strongly consider to either closing all their long positions or at least reduce it. Entering new long position right now is not a wise move. Shortist, on the other hand, can take carefully calculated short positions. Counters that show bearish candles at resistance level can be a good target for short positions. However, strict stop loss levels must be established to avoid upside surprise.