Daily Market Opinion for 6-Jul-2012

Daily Market Opinion for 6-Jul-2012
Daily Market Opinion for 6-Jul-2012

The sky seems to be the limit yesterday as STI surged higher for 7 days in a roll. STI opened flat yesterday morning as participants were unsure of the outcome of the ECB’s meeting result. Profit-takers loomed the morning session causing STI to hit as long as 2942 level. However, after the lunch hours, speculations on ECB’s decision to cut the interest rates starts to bring live back to the market. This enables STI to climb back up to its opening levels and even managed to overtake the selling pressure from the profit-takers. STI eventually closed at 2971 level with 22.7pts higher for the day. Last night, ECB announced its reduction of interest rate to 0.75%. This rate cut was not well received as the market expected more. Hence, DJI react negatively by closing 47.15pts lower. Will STI continue to surge higher today? Or will the ECB’s rate cut announce trigger bearish reactions?

 

STI formed a white candle with lower shadow yesterday. This candle failed the bearish candle on the previous and broke the resistance at 2850 level. However, STI is still facing the gap resistance between 2950 – 2987 levels and yet to break it. The short-term indicators were still bullish but the Stochastic is starting to show a possible bearish crossover. With RSI and Stochastic in the overbought region, the odds of retracement to happen are definitely getting higher. Therefore, STI might still be struggling to break this gap resistance level between 2950 – 2987 levels for the next few trading session.

 

Most of the banks were trading bullishly yesterday after speculations that the banks might benefit from the reduced interest rate in Europe. Uob showed strongest performance yesterday as it managed to break its resistance level slightly. However, one can be unsure of whether it could turn out to be a whipsaw action as its Stochastic indicator started to show weakness in reading. If Uob shows a black candle today, it will mean that yesterday’s action was a whipsaw. Dbs failed to ended bullishly yesterday as it did not managed to break its resistance level. Its black candle action yesterday shows that it is starting its retracement momentum and could be testing its support level at either 13.94 level or 13.76 level. Overall the banks are starting to show sign of weakness despite surging bullishly.

 

The properties went higher yesterday after reports on home sales were showing healthy results. Capitaland rose strongly yesterday which caused it to test its resistance at 2.90 level. Its black shooting star formation failed to confirm and its support level at 2.75 will likely to be a firm support level. F&N also performed strongly after it broke out for historical high. Without existence of resistance level, F&N reached 7.30 level after speculations that their recent privatisation of their China property unit will lead to introduction of a new REITS formation. Overall, due to the healthy home sales report, the properties might still have bullish strength to keep it close to their resistance level. However, if selling pressure starts to set in, they might also start a retracement.

 

The offshores ended slightly higher yesterday. Sembmar showed bullishness yesterday as it continues to attempt to break the gap resistance between 4.98 – 5.07 levels. Its chances of breaking this gap resistance level might be low as its Stochastic indicator starts to show bearish indication. Hence, if Sembmar starts to form a bearish candle, a retracement might happen and it will be heading towards 100ma support at 4.85 level. Both Kepcorp and Sembcorp continue to test their immediate resistance levels and were unable to break them yesterday. Therefore, the offshores were still trading at resistance levels despite their bullish showing yesterday. Retracement might be triggered if a bearish candle is being formed.

 

The commodities were trading mixed yesterday. Golden agri and Indoagri failed to retrace deeper yesterday as they got supported by their 100ma lines. Their 100ma support lines will be the key level to determine whether they will be heading for a deeper retracement. Olam and Noble grp were both trading close to their 50ma support line. They seem to be holding well at this support level and will likely to stay at this level currently. Overall, the commodities will likely to stay mixed for today.

 

In conclusion, the surprising surge yesterday did not stop my expectations of a retracement to happen. With negative closing from DJI last night, it might bring sellers into the market again as traders will make use to current high price to take profit or even do a short position. Various sectors have clearly shown that their short-term indicators are turning weak and are overbought. With STI still trading within the gap resistance between 2950 – 2987 levels, odds of retracement to happen will still be high currently. Any upside should be capped by the gap upper level of 2987 level. Together with the “Sell on Friday” phenomenon, it will be hard for STI to head higher again.

 

Long traders have to continue to be patience wait for retracement despite taking profit too early. Shortist can continue to consider short position when there is bearish reversal candles.

 

*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)