Regional Stock Market Indices Commentaries - 16 June 2008

Kuala Lumpur: An immediate technical rebound is expected

The up trend rally since March, when the KLCI was about 1,200 points found heavy resistance at the 1,300 points level. The movement formed a toppish pattern called the double top or bearish reversal. It was confirmed when the KLCI broke below the double top formation neckline at 1,270 points and the tightening Bollinger Bands started to explode. The KLCI is now at 1229.35 points.

The KLCI is now slightly oversold in the short term as the Stochastic indicator has gone below the 30 level. An immediate technical rebound is expected but may face resistance at 1,250 points (which is the current down trend line support level). It is expected to continue its down trend because the momentum indicators, like RSI and MACD shows strong bearish momentum. Next support level is at 1,200 points. The 1,300 points resistance level remains the main resistance for the KLCI.
 
Singapore: Momentum indicators are currently supporting the down trend

The STI found heavy resistance at 3,500 points level after rallying from its major support level at 2,750 points in March. The resistance caused the STI to pull back to close at 2,979.56 today. The STI which was between the short to long term averages weeks ago now goes back under the average and this indicates that the trend is continuing downwards and the momentum indicators are currently supporting the down trend.

Although an immediate technical rebound is expected because the Stochastic indicator is below the oversold scale below 30, the STI may find short term down trend line resistance at 3,160 points. If the STI is able to break above this resistance, then there is a high chance of it testing the major support level at 2,750 points.

Thailand: SETI is currently at a crucial Fibonacci retracement level

After a good up trend rally since January this year, when the SETI was at about 740 points, the SETI finally met its resistance at 890 points last month. Since then, the SETI slid downwards to 782.34 points today. This slide accounts for a 62% retracement from the up trend rally. Unlike other markets which have found may support levels during the downward rally, the SETI only found once in early June and the rally only lasted two days before the down trend resumes.

With the strong downward momentum the SETI is expected to slide further to test its main support level at 739 points. However, a slight technical rebound is expected immediately because the SETI is currently at a crucial Fibonacci retracement level (61.8%) and the Stochastic has indicated an oversold position and this is the second time the Stochastic crosses above its trigger line. The rebound may be short-lived as the SETI may find resistance at 800 points.

Hong Kong: The HSI is heavily oversold

The China market, which heavily affects the Hong Kong market other than the US market, has been bearish since its peak in October last year and the index was slashed more than half and is expected to continue to decline, given its strong bearish momentum. The Hong Kong market HSI however has shrinked 30% from its peak in October last year. Earlier this March, the HSI made a good short term up trend run of 25% from 21,000 points to the 26,400 points resistance level. The HSI has then started to decline and is currently at 22,590.30 points.

Like the Thailand SET index, the HSI is currently at the crucial Fibonacci retracement level (61.8%) and the Stochastic indicator, which is now below 10, is indicating that the HSI is heavily oversold. Therefore, an immediate technical rebound is expected but may be only a short while because the down trend momentum is still strong. The HSI may find immediate resistance (from the down trend line) at 24,000 points.

US: A little more room to move upwards

The uncertainty in the US economy because of fear of rising inflation resulted from increasing commodity price especially the crude oil has taken its toll on the US stock market. The heavily benchmarked US DJI has affected the performance of other markets around the world. After finding a strong support level at 11,700 points level, the DJI climb strongly upwards since March this year but found a strong resistance at 13,100 points level. A bearish reversal pattern (indicating toppish market) called a double top was formed at this resistance level and it was confirmed and the DJI is now at 12,307.35 points.

A strong upward rebound in the past two days may send a positive note to markets worldwide but the down trend resistance level is at 12,400 points, leaving it a little more room to move upwards. The DJI is not expected to break above this resistance because the momentum indicators like the RSI and MACD are indicating a strong bearish momentum has started to develop and may send the DJI to its main support level at 11,700 points in the longer term.