SG Market Analysis -- 25th Aug 08

STI closed 2,723.30 for the week ended 22nd Aug 08, down 74.2 points or 2.65% from previous week. STI even dropped to an intra-day low of 2708 for the week testing the 2700 psychological support level. For the week, STI has broken down from its March 08 intra-low level of 2475 on 19th Aug 08 when it gap down on open. In general STI market is relatively week with low volume ( 22nd Aug 08 total volume was 645.2M only ) as compared with US markets. The selling pressure was mainly felt by commodity, property and banking stocks. Coupling with corporate earnings for the quarter coming to an end ( left Olam to report its quarterly earnings on 28th Aug 08 ) STI market has rather little lead in its direction. There was some S-Shares rally on 20th Aug 08 when Shanghai market performed a strong rebound from a previous 5% dropped on 18th Aug 08 but the rally was short-lived. For the coming week, STI would be tracking closely global markets for direction.

Technically, there is no sign of a trend reversal from the downtrend in near term. In ADX, DI- is widely space above DI+. With DI- looks like cutting down and ADX line moving up, STI might be bottoming up around the 2700 level. MACD still in negative region and no sign of convergence detected. RSI and Stochastic still unable to move up above the 30% and 20% level respectively indicating the market lack strength for rebound. With a strong closing on Friday session for US markets, the early part of STI market might be able to crawl back to cover the gap formed between 18th - 19th Aug 08; thereby creating an immediate resistance at around the 2770 level. If global markets are able to show excellent strength in rebounding for the coming week, STI might be able to rally up to the 50d EMA level of 2886. For the time being, near term downside is the 2700 psychological level ( if breaks, potential target would be 2600 - 2650 level ) and upside would be capped at the 2800 psychological level.