Despite the slightly firmer opening, the STI soon succumbed to profit-taking pressure, which gradually grew over the morning. By the mid-day close, the benchmark index was off 1.2% at 2611.77, although off its intraday low of 2606.05.
Volume was little changed from last Friday's morning session with 1663m units traded, but losers overwhelmed gainers by over 2.5 to 1. Hence it was no surprise that only three of the FTST sub-indices were in the black.
On the technical front, the profit-taking was not unexpected ? the price action last Friday had formed a doji star, which suggested that the market looks pretty indecisive at the moment.
Investors were probably anticipating a dearth of newsflow with the end of the results season (for those companies who have their financial year end in Jun).
But intraday technical indicators are signaling a possible reversal in sentiment ? we may see more bargain hunting in the afternoon if Europe opens positively.
We peg the immediate support at 2601 (psychological and centre line of the Bollinger Band), ahead of 2521 (mid-Aug low and also the lower Bollinger Band). On the upside, the immediate cap is at 2681 (50% retracement of 3906-1455 plunge), ahead of 2700 (psychological).
We also suggested that S-chips and offshore & marine stocks would very likely rise and both sectors have seen sporadic interest. We expect that to continue into this week. However, index stocks have lost some of their momentum and market breadth is now lower than at prior peaks. Our preferred stance is to sell into strength for most index stocks.
US indices have very likely completed a wave 4 move and the DJIA and S&P 500 will very likely break out next week. However, we lower our upside target for the DJIA from 10,000-10,100 towards 9,800-9,900.
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