Daily Market Outlook for 9-Dec-2011

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STI had a knee jerk reaction after Singapore government announces the increment of property stamp duty. The properties sector suffered sharp drops while the banks were also affected. STI gapped down in the morning and did not manage to make any rebound during the day. Selling strength persist during the day which caused STI to drop 54 points yesterday. The key support level of 2740 has also been breached as STI closed at 2728 level. Breaking of this key support level would mean further downside is to be expected. Last night, the European Central Bank had a meeting to discuss about the current European situation. The bank’s chief failed to agree with people’s expectations of buying up bonds to help then current situation. Traders’ expectation fell short and the European market fell into red. This brought the DJI to trade 198pts down last night. How far will STI drop today? Is there still hope of rebounding?              
              
STI gapped down with a long black candle yesterday.  There was no gap resistance being created despite the gap down. The long black candle created a bearish reversal formation which has a strong indication that STI is likely to slide down further. Furthermore, the black candle also broke the 20 & 50ma support line, which brought STI to be below all the MA lines again. This is a bearish indication for the mid-term. The histogram, which stubbornly refused to trigger bearish signal for the past few days, formed a bearish signal yesterday. Stochastic still remains bearish after it had confirmed its bearish signal the previous day. Therefore, STI is expected to fall further today. The immediate support level would the lower level of the gap support that was created last week. The gap support of 2702 – 2755 was not closed after it was formed. Hence, there is still a chance that it might support the index. Hence, 2702 level might be a possible level to look at while a horizontal support is at 2690 level. However, as STI has formed a lower high formation, it would probably test its recent lower low level of 2650.               
              
The banks experience selling pressure yesterday after the government’s announcement of the property curb. They were unable to maintain their support at 20ma and closed below it. Uob had its bearish signal being confirmed and it should be heading lower. DBS suffered the strongest selling pressure within the sector but it might be support by its 50ma line. The offshores did not experience strong selling pressure yesterday as the government measures do not have an impact in this industry. They were still able to trade above the 20ma line but it is certain that their bearish momentum will still continue because of the confirmation of their bearish signal yesterday. Their key support would be their 20ma line.              
              
The properties sector suffered the most impact after the government’s announcement of the property curb. Most of them drop at least 6% yesterday and they started out with a strong gap down. Citydev took the biggest hit yesterday and it is likely to continue its selling spree as its downtrend has been confirmed. Its immediate support level is at 9.12 level but it is likely to break due to bearish signal from the histogram. Hence, it should be heading towards the next support of 8.78 level. The commodities were down slightly yesterday and were lacking of trading activities. There were no much trading actions within the day as most of them ended the day with a doji. Olam was the only one of them that suffered selling pressure yesterday. Olam had broken the 20ma support and has confirmed its lower high formation. It should be heading towards its immediate support level of 2.24.                 
              
In conclusion, with negative news sprouting out from local market and foreign market, STI will not be able to avoid further selling pressures. Banks and Properties will continue to experience selling pressure today while the rest of sectors might also start its selling pressure. The offshores and commodities are mostly resting on the 20ma support level. Their 20ma support levels are the keys to determine whether they will start their downtrend formation again. Immediate support level for STI will be around 2690 – 2702 range. However, due to the lower high formation of STI, STI might not be able to hold this support level. Testing of 2690 – 2702 support levels is very likely to happen today but breaking it might be a next week’s affair.              
              
Long traders whom have long positions must be discipline enough to stop their losses. Entering new long positions right now is not a wise move as STI have not show signs of support holding. Shortist on the other hand is enjoying profit if there is short position executed for the past few days. Shortist should try not to add new short position as the downside is getting limited. Take partial profits if targets have been met.