Daily Market Outlook for 14-Dec-2011

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In reaction to DJI’s previous day’s bearish closing, STI started yesterday with a gap down of 24pts which broke 2690 support immediately.     STI struggled to keep its heads up throughout the day and tried to trade above 2690 support level but it failed to do so. Trading volume was weak and there is no sign of panic selling going on. With its attempt to rebound during the day, STI managed to gain back some of its ground and close at 2685 level. Slightly below 2690 support level. Last night, DJI ended 66pts down again. Will STI continue to head towards the next support level of 2640 today?

STI closed with short white candle with upper shadow yesterday. The white candle formation implies that STI rebounded to close the gap down it had created during the day. Its upper shadow shows its failure to rebound above 2690 level. The short term indicators continued to show bearish momentum and Stochastic remains in the oversold region. However, Stochastic is starting to turn upwards and might create a bullish crossover soon. Breaking of 2690 level will indicate that STI should be heading towards the key support level of 2640. With slight weakness in the stochastic indicators, 2640 support level is likely to hold well.

The banks were trading mixed yesterday. Uob was trading against the market sentiment as it ended higher yesterday. Uob even managed to break the 20ma resistance with strong volume and this movement might bring it to head towards 16.00 resistance level. DBS ended lower yesterday but it still managed to hold itself at its key support at 11.90 level. The offshores ended lower yesterday as selling pressure continues. Kepcorp is still holding well at 100ma support and it had formed a possible bullish crossover in stochastic. Sembcorp is struggling not to break its recent low support level at 4.01 level, it closed at 50ma level and stay supported by 4.01 level.

Most of the properties closed lower yesterday. Citydev and Kepland continue to suffer selling pressure from the effects of the property curb. F&N rebounded strongly after it had test the 100 and 200ma support level. However, its rebound had caused it to close at its resistance level of 6.10. Despite bearish movement by the properties sector, their bearish movements are getting weaker as their candle formation got shorter. Most of the commodities ended either flat or slightly lower yesterday. This sector helped STI to recover some of its losses during the day as the commodities recovered significantly during the day. Noble grp continues to stay above its 20ma line and is still not showing signs of breaking its support level.

In conclusion, STI might continue to experience some selling pressure early in the morning today. However, the selling pressure might not be strong as numerous sectors were showing resilience to drop lower yesterday. Offshores and commodities might be preventing the market from falling further today as they are holding at their support level well. The banks might also help to hold the market as long as they are able to hold firmly at their support levels. Hence, we might not be seeing STI to head towards 2640 support immediately today but some slight recovery in prices might occur. However, this does not mean that STI had hit a bottom and will be a good time to go long. Cautious approach is still a better choice.

Long traders are to continue waiting for good reversal sign at support level before entering long positions. Shorts on the other hand might be interested to enter short positions selectively. Counters that are support levels can be a good target for shorting but a cautious approach is greatly encouraged. Tight stop loss point for shorts should be established to avoid shock when reversal comes.