Market Outlook (08/05/10): Largest drop in STI since Oct 2008!

In last week, STI lost stunning 153 points from the opening of 2974 and close lower at 2821 to mark a LONG black candlestick indicating the largest drop for the week since Oct 2008.  The trading volume for this week is high as well showing that the bears are back on track and ready for their sell down.

Concerns on Europe's debt crisis continued to spook investors for the entire week raising doubt about the sustainable of the global economic recovery. 

In fact, this news has caused a closely monitored gauge of investor fear, CBOE Volatility Index (VIX) to rose at a thirteen-month high on Friday's trading session.  It is the first close above 40 ever since April 7, 2009

Technical Analysis on STI

We thought of owning explanation to readers on why there is a call for buying stock on Thursday night in the blog for STI 2800 and below.

1)     There was an “Inverted hammer” & “Hammer” bullish reversal candlestick that happen on 5/6 May consecutively. This shows that the buying pressure is going up as STI slump downwards and the LONG bullish white candlesticks on Friday actually confirm that this thinking is correct.

2)     STI 2760 will be a strong support since many prices gathered at this zone.

3)     STI 200 days moving average at 2760.

4)      The STI major uptrend line currently at 2760.

5)     Very STRONG MAJOR support at 2660 which should not be broken.

However situation in Singapore market is still bearish as STI lost 5.16% with constant high volume which does not seems to ease any time soon. Traders are simply shorting/selling the market using Europe debts as excuse.

Currently, STI are heading towards a pullback/correction but everyone will be watching the major resistance at 2660 which managed to support the market on Feb 2010. If STI 2660 were to be breach, “Lower Low” will be formed and the STI major uptrend will be considered broken. At that time, bears might start to short at high pressure with bulls withdrawing from market at all cost.

Important resistance of STI: 2850

Immediate Support of STI: 2760

MAJOR Support of STI: 2660

MY tactics: We have already started the first step in accumulate stocks on Friday but will not buy anytime soon. Instead we will wait for the market to stabilize before deciding on the next action.