Technical View – Global Indices

Straits Times Index: Still room for further upside till 2,391

We had not expected a 3.7% weekly increase. Our repeated calls for the Straits Times Index (FSSTI Index) to undergo a correction were not met as liquidity continued to soak the market while sentiment remained bullish. With price action performing against our forecasts, our Wave Count has therefore been revised and we now believe that the STI is still presently in the midst of a Wave 1. This in turn indicates that additional upside from current levels are still possible.

While we believe that the STI is still set to appreciate by virtue of the Wave 1 that it is presently riding on, note that the bollinger bands are currently contracting – this suggests that the STI may enter into a consolidation period before staging another push up higher. Furthermore, the 14-day RSI is also approaching the 70 mark – while this implies that the STI is in the danger of being in an overbought condition, we believe that any pullbacks would be limited due to the strong support levels seen below.

Targeting the 2,391 level. Resistance is seen at the 2,390 mark where we believe that STI would fulfill the 38.2% fibonacci retracement of Wave C [ 1,455 + 0.382 * (3,906 – 1,455) ]. On the other hand, initial support is situated at the 2,230 – 2,234 area where the 14-day moving average and a series of daily lows are located. Further support is also present at the 2,190 – 2,193 region where the 21-day moving average resides.


Shanghai Composite Index: Breaking out from Symmetrical Triangle pattern

Previous Wave Count still at play. Price action of the Shanghai Composite Index (SHCOMP Index) emitted a slight bullish tone as it inched up 1.3% during the shortened trading week. Given that there had been no adverse movements that had altered our Wave Count, we therefore are maintaining that the present Wave 5 remains.

A breakout move may be currently happening. A consolidation pattern in the form of a Symmetrical Triangle formation had seemingly been fashioned during the past month or so. More importantly, the "long white day" candlestick that appeared during the previous trading session is suggesting that the index had broken out of this consolidation pattern – we therefore believe that further upside would be forthcoming.

Price target stays at the 2,743 mark where resistance is identified through a series of daily highs. Support, on the other hand, is seen at the 2,538 – 2,563 area where the 30-day moving average and a certain trading low are situated.


Dow Jones Industrial Average: Consolidation to persist

Our call for consolidation to take place within the Dow Jones Industrial Average (INDU Index) proved to be fairly accurate as the index was stuck between our resistance and support levels while it bounced around a 296-point (8226 to 8522) range. Although we would be sticking to our Wave Count (currently at Wave 2) for now, note that it is highly possible that we would be revising it should price action were to turn bullish.

We expect range-trading to remain, given that the technical indicators are depicting a neutral feel. The bollinger bands have been contracting during the past week or so, implying that volatility is decreasing. Additionally, the 14-day ADX has also trended downwards, signifying that the present trend is losing strength. Lastly, candlestick charting has not shown the index to be affixed in any particular direction, as noted by the absence of successive higher highs or lower lows for around the last three weeks.

Resistance at the 8,591 – 8,594 level remains at where the end of Wave 1 and the upper bollinger band is located. Meanwhile, initial support is positioned at the 8,221 – 8,246 region where a series of daily lows are seen. Additional support is also available at the 7,781 – 7,804 area as represented by the 38.2% fibonacci retracement of Wave 1 and another series of daily lows.


S&P 500 Index: Further range-trading to be expected

Continues to mirror its counterpart. Similar to the DJIA, price action in the S&P 500 (SPX Index) had also experienced limited movements during the past week. As with the DJIA, there will be no revisions to our Wave Count. With the various technical indicators emitting a muted outlook as the bollinger bands tighten, we are also expecting the S&P to consolidate.

Key levels to note. Resistance at the 928 to 930 region – outlined by the end of Wave 1, the upper bollinger band and the 200-day moving average – is not expected to be broken through. On the other hand, first support is identified at the 878 – 881 area, courtesy of a series of daily lows. Stronger support in the form of the 38.2% fibonacci retracement of Wave 1 and the 100-day moving average is also available at the 830 – 832 range.


Hang Seng Index: Breakout from Symmetrical Triangle reaching exhaustion

Price action was not within forecasts. The Hang Seng Index (HSI Index) went against our bearish call and saw a 6.5% weekly gain. We would thus be revising our Wave Count – as a result, we now opine that the HSI is presently still riding on a Wave 1 with more upside to be realised.

Breaking out from consolidation. Additionally, we believe that the HSI is currently breaking out of a Symmetrical Triangle formation that is halfway through its destination after the sizable gains seen during the previous two trading sessions. This is further evidenced by the 14-day RSI which is on its way to reaching the overbought territory. Nevertheless, aggressive investors can still engage in long positions at current levels to ride the short-term bullish trend which we think is already halfway to its exhaustion point.

Upside may be limited to the 18,865 resistance level [ 11,344 + 0.5 * (26,387 – 11,344) ] where the 50% fibonacci retracement of Wave C resides. Conversely, support remains at the 16,268 – 16,334 level where a series of daily lows are located.















DMG & Partners Research Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months
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Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
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Neutral: Share price may fall within the range of +/- 10% over the next 12 months
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Take Profit: Target price has been attained. Look to accumulate at lower levels
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Sell: Share price may fall by more than 10% over the next 12 months
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Not Rated: Stock is not within regular research coverage



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The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to change without notice.

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