Daily Market Outlook for 8-Dec-2011

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STI rebounded strongly yesterday after it had tested its strong support at 2740 level. This strong rebound aid STI to test the immediate resistance level of 2790 but STI failed to break this resistance level. STI surge as high as 2793 level but it retrace and close at 2782 level. Thus, STI closed 33pts higher. This bullish mood might be dampened by Singapore Government’s announcement yesterday. Singapore government announced a rise in stamp duty tax so as to curd property speculation. This will definitely hurt the properties and banking sectors today. DJI close 46 pts higher last night as it continues to stay cautious. Will STI be able to stay bullish today despite the bad news from the government? Will STI test 2740 support level again?               
              
A long white candle was formed by STI yesterday. Although the opening created a gap, STI managed to cover it within the day and continued surging upwards. The bullish strength within the day might be strong, but it is unable to break its resistance level of 2790. The Histogram still remains bullish but stochastic still remains bearish despite the strong movement yesterday. The signals from the indicators are mixed and are hard to determine which direction the market would take. However, it is clear that 2790 is a key resistance level to determine the upside potential and 2740 is the key support to determine the downside potential. Hence, STI is likely to continue to trade within this range.               
              
The banks were generally flat with an exception of DBS. DBS managed to bounce of its 20ma line yesterday and stay above it. However, it is still facing 100ma resistance level. Its bearish signal failed to confirm after yesterday’s movement. Both UOB and Ocbc were sitting on the 20ma line and were indecisive on which direction to trade yesterday. Bearish signal is appearing in UOB and it might continue it’s downwards slide. The offshores were trading flat yesterday as they did not have any catalyst to surge yesterday. They are still trading close to their sideway resistance level and are unable to break it. Their lower shadow formation for the past few days also shows their reluctance to trade lower. Hence, they are likely to trading in the range for today.              
              
The properties will most likely be affected by the government’s announcement yesterday. High end residential developer is likely to have a bigger hit as the stamp duty will have a bigger impact on properties with higher price tag. Citydev is one of the high end developer and it likely to take a big hit today. Yesterday, it is trading at its 20ma support level which confluences with 50ma. If it fails to hold today, its downtrend will continue and it can potentially hit its recent low of 9.12 level. Kepland could be another target as it is trading close to 20ma and 50ma. If it fails to trade above these 2 levels, it will form a lower high and its downtrend could continue. Lastly, the commodities were trading flat yesterday as trading interest were not on this sector. Only Golden Agri enjoyed the limelight as it manage to surge back to its recent high of 0.72 level again. It had formed a good support at 0.705 level and might be ready to continue its uptrend.                 
              
In conclusion, STI might have shown its possibility to break 2790 resistance level. However, due to Singapore government’s announcement of increment of stamp duty for the properties, it will greatly impact the properties sector. The properties sector might tip to the downside with formations of lower highs today. Banking sector, which traditionally enjoyed house loan income, might also be affected. If the banks fail to hold above 20ma, it will form lower highs also. Therefore, STI is very unlikely to break 2790 resistance level today. Instead, it should be testing 2740 support level again. It might even threaten to break 2740 level and starts to continue its downtrend again.              
              
Long trader might have thought that their hope of an uptrend formation is coming true. However, with the bad news from the government, this hope might be shattered. Entering long positions now might not be wise as STI might threaten to break 2740 support level again. Hence, staying sidelines could be a good strategy for now. Shortist on the other hand might sweat after seeing such strong movement yesterday. Some might have even stopped their short position after their tight stop loss level is reached. Hence, Shortist might be alert again to enter short positions that still yield good downside potential today.