Daily Market Outlook for 13-Dec-2011

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STI attempted to rebound yesterday after positive closing by the DJI last Friday. STI opened with a gap up and test the gap resistance between 2711 – 2726 levels. However, STI is unable to break this gap resistance and started to retrace during the day. Prices were generally flat during the day with light volume. Selling pressure came after lunch in reaction to weak opening by the Europe market. Asian market also turned weak and slip into the red territory. Despite red closing by the Asian market, STI still managed to close 7pts higher. Last night, the DJI failed to continue its rebound and ended 162pts lower. This will likely to bring STI to open in the red territory today. Will STI be able to hold its support level at 2690? What will be the next support level?              
              
STI formed a short black candle which closes the gap resistance level. The declining 20ma line seems to be resisting the price from going higher. Short term indicators were showing bearish momentum and are likely to continue. Stochastic has just entered the oversold zone and is also likely to continue to slide lower in the zone. The squeezing Bollinger band indicates that there is a possibility of a breakout happening. As the trend is downtrend, breaking downwards is very likely to occur. The immediate support of STI stands at 2690 level. If 2690 level fails to hold today, it should be heading towards the next support of 2640 level. 2640 is a key support level as it determines whether STI will head for a lower low or not.               
              
The banks tried to rebound yesterday but they faced resistance levels. Ocbc and Uob faced resistance from 20ma and were unable to trade higher than the resistance level. DBS is trading close to its recent low support level of 11.90. If it fails to hold at this support, its downtrend will be confirmed. The offshores were struggling to hold at their support levels and were reluctant to break it yesterday. Sembcorp and Sembmar held at their 50ma support line and their lower shadow showed its reluctance to break the support. If it fails to hold, Sembcorp and Sembmar will be testing their respective sideways support level.               
              
Most of the properties closed mixed as many continue to fear that prices of property price would drop lower after government’s curb on the properties. There were attempts to rebound but they failed to trade higher as the broad market failed to maintain its bullishness. F&N is now sitting on the 100 and 200ma line but it is resisted by its 50ma resistance. Breaking of 100 & 200ma will imply further downside for F&N. The commodities traded mixed yesterday as they are lacking of catalyst to have substantial movements. Indoagri, Olam and Wilmar were facing resistance from their 20ma line and they did not manage to break it yesterday. Noble grp and Sakari are held by 20ma support line. Any bearishness will threaten their support and breaking it would mean more bearish downside is to come.                  
              
In conclusion, despite a bullish opening, STI failed to maintain the bullishness and ended up trading bearishly. This means that there could be more selling strength to the market. 2690 is likely to be tested today and its support could even be broken as DJI closed weakly last night. If 2690 support fails to hold today, STI should be heading towards 2640 to find support. 2640 support is a key support level as breaking it would mean its downtrend will be confirmed. The offshores and banks might be the main contributor of the selling pressure if their support level breaks. Henceforth, STI will be facing test of selling pressures.              
              
Long traders should avoid picking position to go long currently. Great patience is needed to wait for the best support level to do a counter trend long. Shortist whom had taken partial profit should enjoy the downside ride with the remaining short positions. Profit taking can be executed when their target price is reached.