DJ INDU AVERAGE=8,426 (The breakout of the trendline was confirmed by a higher high after 3 trading days)
The stronger Wall Street close is likely to further ignite the already buoyant local sentiment further, as more signs point towards the US economy reaching a bottom.
The STI shot up nearly 6% yesterday to end at 2028.71, its first close above the 2000 level since 15 Oct 2008.
While the daily technical indicators have reverted to a slightly more positive tone, the risk-reward at current levels have dropped significantly; the STI has already risen by more than 39% since bottoming out at 1455 in March, with >12% of gains coming from the last three sessions.
Moreover, we note that most houses currently have an upside target of just 2,100 for the STI, suggesting that the market is nearing "fair value" in terms of valuations; of course we do not rule out an upgrade should there be concrete signs that the global economy has started to recover.
In the near-term, we see 2100 (psychological resistance as well) as the key hurdle. Should it convincingly clear that hurdle, the next key resistance is at 2390 (38.2% Fibonacci retracement level), although it may face some intermediate hurdle at 2102-2128 (minor gap in Oct '08).
On the downside, we expect the initial support at 1863 (centre line of Bollinger Band), ahead of 1808 (30-day moving average).
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