Technically, STI long term trend is neutral and short-term appears to be on the downside. The DI pair still negatively spaced but with ADX dropped well below the 20 level, the downside shall be lacking in strength with STI being well supported at the moment at 1,700 level and resistance at 1,800 level. RSI is showing relatively flattish around the 60% level and with it being above 50% level suggesting the downside is well contained. Stochastic signal has yet to cut up indicating short-term trend is bias towards the downside more.
For the coming week, it is just 3 days away from end of 2008. With most of the bad news probably well absorbed by the market, the downside should be well contained even if bad economic data from US. Traditionally, STI will have year end rally plus the capricorn effect. At current level of STI, it is considered relatively cheap valuation and hence the possibility of having a year end rally plus capricorn effect could not be ruled out despite the great uncertainty about the global economy in 2009. If there is ever a year end rally, the index component stocks shall be leading the way followed by other blue chips.
For short-term investors/traders who are aiming for the year end rally should consider looking at the index component and blue chips and buy into them whenever there is a dip in the price levels.
For long-term investors with at least 5 years investment 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.
