SG Market Analysis -- 19th Jan 09

STI closed 1,730.45 for the week ended 16th Jan 09, down 75.57 points or 4.18% from previous week. STI fell from start of last week and only managed to rebound on the last day of the week when investors selling stocks after bad or worse than expected economic data and also poor corporate earnings. SPH was the first of Singapore blue-chips to report its earnings and with a drop of profit almost 35% and missed market expectation, the selling pressure piled up. Bank stocks were under selling pressure when news of Morgan Stanley intention of acquired Citigroup securities group business putting concern that Citigroup in need of further money. Offshore/Marine and commodity stocks were also under selling pressure when crude oil price didn't manage to rebound back to US$40/barrel level. Singapore non-oil export also fell 21% with its latest released of data. Market did managed to rebound on the last trading of the week when JP Morgan reported result beat market expectation and Obama got the green light from Senate about his proposed stimulus package.

Technically, STI long term trend is still sideway, short-term might be due to oversold rebound in the coming week. STI hit an intra-day low of 1,693 on 15th Jan 09, and this bring an interesting aspect from the chart of STI. Starting from 21st Nov 08 till 16th Jan 09, STI apparently obeying the Elliot Wave with :-

Wave 1 UP : 21st Nov 08 - 28th Nov 08
Wave 2 DOWN : 28th Nov 08 - 5th Dec 08
Wave 3 UP : 5th Dec 08 - 7th Jan 09
Wave 4 DOWN : 7th Jan 09 - 15th Jan 09
Wave 5 UP : 15th Jan 09 - ???

If the Elliot Wave formation is valid, STI might be on a Wave 5 for the coming week with a potential target hitting between 2,000 - 2,100 level. The Stochastic signals fell into oversold region but are showing sign of possible rebound in the coming week. RSI still floating around the 50% level indicating the downside for last week was relatively well absorb. The only negative aspect for the moment is the DI pair still negatively space but with ADX below 20 level, the downside looks very limited for the time being. The critical point for STI for the coming week will be the 1,680 level. If this level is not hit then there is a high chance that STI is indeed on an Elliot Wave 5 movement soon. A breakdown at the 1,680 level probably will see STI tank to 1,580 level. Immediate resistance is the 1,800 psychological level.


For the coming week, couple of importance events will dictate the direction of STI. US markets closed firm up last Friday prior to 20th Jan 09 Obama's inauguration and this could trigger STI to bias towards the upside for the time being. 22nd Jan 09, Singapore budget day will be another main focus point when investors keep a close monitor of what Singapore Government will propose and implement to save the economy for year 2009. Pre-CNY rally is also on most investors' eye especially when stock prices have fell to a relatively cheap level since 2nd Jan 09.

For short-term investors/trades who believe in a possible rally coming for Obama's inauguration, Singapore budget day and pre-CNY, if STI didn't fell below 1,680 level, potentially STI is in Elliot Wave 5 mode already and opening a long position with target between 2,000 - 2,100 could be considered.

For long term investors, with corporate earnings announcing the coming week, it is good time to read through the balance sheets and hunt for the quality stocks and buy into it when price becomes at attractive value. Spreading out the purchase would be good as it could minimize the downside risk.