STI closed 2,850.59 on 12th August 2011, a drop of 463.02 or -13.97% from the peak of 3,313.61 ( achieved on 9th November 2010 ) after hitting the lowest of 2,720.21 on 11th August 2011. Has the market hit the lowest point for this correction relating to US crediting rating downgrade and persistence issue from Europe zone debt ? Chances are STI might have already hit the lowest for this correction and to further confirm of that need to monitor for the following events to occur :-
1. any pull back should see 2,730 as a support and rebound from there.
2. there should not be any wild swing of index both locally and global markets in particular US ( ie more than 2% from day to day )
3. market should be in range bound mode with daily volume moderating to a lower value than those past days of at least 2.5b.
4. in the face of bad news, pull back in market should fall back to support levels and not breaking those
5. in the face of good news, market rises but unable to break the resistance levels
6. technically speaking, higher low should be achieved
7. technical indicators wise, observe for bullish divergence occurring in Stochastic and/or RSI
With the above signs, market is said to be building a base or consolidating before the strong rebound. Consolidating period could last for weeks to months.
From a range bound perspective, the followings are the possible range band for STI :-
1. 2,730 - 2,810
2. 2,810 - 2,920
3, 2,920 - 3,020
4, 3,020 - 3,080
5. 3,080 - 3,120
Breaking down at 2,730 will mean we have not yet the lowest point and with 2,650 as the next target. Breaking 3,120 indicates STI will resume the uptrend.
The recent correction from macro level is indicating Singapore economy should enter technical recession by Q3 2011 and as for will Singapore enters the real recession, that is still too early to confirm as no sign of that ( from economic data ) showing up yet. For US, question was raised lately as to whether US will enter recession. Again, the mixed economic data and corporate earnings till now has no clear indication of that but if situations do not improve in the next 2 quarters, chances are it will in 2012 and that will drag global economy down again.
Miss buying at low ? Answer is no, it is very unlikely one can buy at the lowest point as that is the time when panic and fear over rule everything and not many can overcome those psychological effect to actually buy. However, while market is consolidating and building a base, it is still consider buying at the bottom.
Investors could start to nibble some especially those fundamentally strong blue chips ( companies with very healthy cash flow position, balance sheet and solid earning for past quarters ). With the recent selling down, S-Reits prices also have fallen to make their dividend yield much more attractive now. Investors who want a constant income source as a form of dividend could consider those. Fundamentally strong S-Reits namely are :-
1. A-Reit
2. CapitaMall Trust
3. CapitaComm Trust
4. First Reit
5. K-Green ( technically it is trust rather than a Reit )
6. MapletreeCom
7. MapletreeInd
8. MapletreeLog
9. Plife Reit
10. Suntec Reit
With the current battled down prices of those, the dividend yield as of now base on current distribution ranges from at least 5.3% to almost 9% for the above listed.
Though investors could start to accumulating, should also bear in mind that if the global situation getting worse and no show of improvement for the next 2 quarters, stock prices will drop further. STI 2,400 is a level whereby indicating Singapore will enter real recession. Hence, while accumulating, do also maintain free cash position to cater for the worst case of entering recession again.
Short-term time frame investors could use the above range band to trade on.
