Regional Stock Market Indices Commentary - 7 July 2008

Kuala Lumpur: Technical rebound expected

Negative sentiments from rising inflation to the comical political instability have taken toll into the stock market. The KLCI fell about 1200 points or 9% in 2 weeks. The KLCI easily broke the 1,200 points support level and it is now at 1134.14. The aggressive downward movement has caused technical indicators to show that the down trend has turned strong. The average prices is currently between 1,190 points and 1,250 points.

This means that the KLCI is oversold and this is also indicated on the Stochastic and RSI indicators. The daily price movement on Friday suggests a price reversal. Therefore, a technical rebound is expected, IF there are no negative follow ups to the current problems that causes negative sentiments. Support level is at 1,100 points while immediate resistance is at 1,190 points. In the long term, the KLCI is expected to continue to its down trend to the major support level at 1,000 points.
 
Singapore: Technical Rebound expected

The Singapore market was drifting sideways with a downward bias as worries about soaring crude oil price and other commodities may lead to lack of confidence in the equities market. As of Friday, the STI closed at 2,892.54 points. The STI went to a low of 2,862.27 on Thursday and formed a Candlestick “Doji” pattern which represents uncertainty and on Friday, that pattern turned into a “morning star” which represents a price reversal. Therefore, a technical rebound is expected to happen. Furthermore, the STI is currently oversold in the short term as Stochastic is below 30 and the average price range for STI is between 3,000 points and 3,100 points.

The current trend is still down and with strong momentum. This means that the technical rebound may be small and down trend shall resume once the rally on the rebound is over. Resistance is expected to be at 3,000 points while support level, which is a major one, is at 2,750 points.

Bangkok: More downside for the SETI

A string of street protests against the current government has caused confidence in the equity market to be weak as well. The SETI is now back to its level where it was before the new government was formed. It is at the major support level of 734 points. The SETI closed at 743.03 on Friday. The current trend is obviously down and the momentum indicators like RSI and MACD are still indicating a strong down trend.

There are no indications of price reversal detected on the SETI as opposed to other markets. Therefore, more downside for the SETI is expected and it may test the support level of 734 points again and most probably would break below this level this time to continue the down trend. The next support level is at the psychological 700 points level. Current resistance level is at 786 points.

Hong Kong: Expected to test crucial 20,500 points support level.

Like the rest of the regional markets, especially the US, the HSI continues to slide down further and fell about 2,000 points or 10% in one month. The Hong Kong market is also affected by the weak performance in the Shanghai equity market. As of Friday, the HSI closed at 21,423.82 points. The movement on Friday has formed an uncertainty Japanese Candlestick pattern called “Doji” which indicates uncertainty. When price is uncertain in a down trend, an upward rebound is expected.

The rebound may be short-lived because the current down trend is strong. Although an immediate rebound is expected, it may face resistance at 22,300 points and later continue its down trend to test the crucial 20,500 points support level.

US: Price Reversal Up on DJI

Negative economic data and rising crude oil and commodities prices have put some fear on investors. The DJI continues to fall about 1,000 points or 9% in one month. The current trend is strongly down and although it has been heavily oversold, a technical rebound has yet to be seen. The DJI even broke below the crucial support level at 11,700 points. The market brings a little cheer for investors just the day before the Independence Day holiday because it closed up and formed a price reversal up pattern.

Can the reversal turn into an upward rally. It may happen because the DJI is heavily oversold and has been in this position for weeks. The average price range for the DJI is between 12,100 and 12,400 points. The DJI closed at 11,288.54 points last Thursday. However, the upward rebound may be small because the down trend is strong with a resistance at 11,600 points. Support level is expected to be at 10,600 points.