SG Market Analysis -- 29th Sep 08

STI closed 2,411.46 for the week ended 26th Sep 08, down 147.61 points or 5.77% from previous week. STI started the week with a half-day rally in response to a strong closing from US markets the Friday before but the sentiment soon turned bearish when investors were very concern about the US$700b US Government rescue package whether it was feasible and effective. Since then on, for the rest of the week, STI constantly under heavy selling pressure despite some good news that Warren Buffett bought into US$5b of Goldman Sachs stake and Nomura acquired Lehman Brothers' Asia operation unit ( which prevent job cut in Asia unit ). Further worries were resurfaced on Friday when Singapore reported a drop of 12.2% in its Manufacturing activities which could lead Singapore into a technical recession.

Technically, STI is in a downtrend in mid to long term. Short-term indicators also pointing to a downtrend. DI+ and DI- were widely spaced out; moving further away from each other and since ADX is around 30 level indicating this divergence is of moderate strength. MACD signals show no sign of convergence and MACD histogram still in the negative region. RSI turned down below 30% level while Stochastic also falling towards the 20% level. Short-term support would be the recent intra-day low of 2,307 and if that gives way, STI could fall further to ultimately the level around 1,950. If there is any rebound or relief rally perhaps due to the good news on the US$700b rescue package, the upside could be capped at the 50d EMA level of 2,682.


For the coming week, market will be very much driven by news about the US$700b rescue package. A final decision is expected over the weekend or latest Monday on the approval of it. If the news is positive and global markets welcome it, STI could potentially posed a relief rally. However, that will not negate the fact that the US sub-prime financial crisis is far from over. Note also end of the month next Tuesday, market might have a quarterly window dressing.

For short-term traders, advice is not to chase the price when a relief rally kicks in as the rally won't be able to sustain for long.

For long-term investors with 3 to 5 years time frame, should be looking from fundamental point of view of a counter and decide on various entry prices to slowly collect, spread out the purchase and that could minimize the downside risk quite an amount.