HANG SENG INDEX (potentially a Bearish Engulfing)
The DJIA's rally past its 8,600 double-top resistance early this week was not supported by higher trading volume. This is not a good sign. The DJIA may complete one more upleg towards 8,800-8,900 sometime this week before a long-overdue correction kicks in. Early this week, the MSCI Asia ex-Japan Index reached the crucial 401pt 38.2% FR of the 2007-08 decline. Most regional equity indices have almost tested or surpassed their 38.2% FR over the past week and are overdue for a correction. Their pullback yesterday could be an early sign of more correction in June. We believe the wave "B" bear market rally is not over yet. Assuming Asian markets do retreat in June, it should build the base for a final wave "c" upleg probably sometime in 3Q09.
Long-overdue HK market correction deepens in afternoon, with HSI now down 2.8% at 18,355.78. JPMorgan believes HK market currently due for correction, as trading volume appears to be at unsustainably high levels; still, believe cash levels remain high, investment funds seeing further inflows; "we are expecting a correction in the order of 5%-10%, not 15%-20%," JPM says. Based on today's intraday peak of 18,916.61, 5%-10% retreat would put HSI correction target at roughly 17,000-18,000.
Our near-term view was that STI should pause for a breather at 2353-2400 and the pullback should be mild with support at 2180-2240 before resuming its up trend to 2560. No change in view, although the index rose slightly above 2400 intra-day on Monday. STI could re-test or edge slightly above Monday’s high of 2424 before pausing. For the Dow, the next level to watch is the 9030 that is the 38.2% upward retracement level. Still, we maintain a buy-on-pullback strategy as the recent slew of economic data across the globe continues to support the ‘green shoots’ theory.
Foreigners are starting to purchase private homes in Singapore, this according to consultancy firm DTZ Research. A total of 117 caveats were lodged by foreign buyers in April compared to 174 for the 3 months during 1Q09. The 1Q figure is already an 11.5% increase from the 156 caveats that foreigners lodged in 4Q last year.
Singapore’s PMI expanded for the 1st time in 8 months as the index rose to 51.2. Electronics output, which had already bounced back into growth territory in April, maintained its strength, expanding for a second month in a row. The electronics PMI posted a reading of 52.9, up from 51.6 in April. Apart from Singapore, China and India have also recorded positive expansion in their PMIs. But the US PMI remains in contraction, although it shrank by less than expected last month, according to figures released on Monday.
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