Technical View – Global Indices

Straits Times Index: The music will soon cease

The party never seems to stop. The Straits Times Index (FSSTI Index) has once again defied our expectations for a pullback. However, with the RSI languishing at highly overbought levels coming in at a reading of 80 which even surpasses the mark seen during Oct 07 when the STI was trading at its all-time high of 3,906, we think that an impending pullback is way overdue. Any additional short-term gains seen in the index should therefore be regarded as an opportunity to take profit.

How strong will the retracement be? As noted in an earlier report, the STI has clearly outperformed the other global indices during the fortnight or so, a trend that we also think is unsustainable in the short-term. However, we believe its pullback (in the form of Wave 2) should be limited to the 2,010 – 2,050 region where the pertinent 200-day moving average and a series of daily lows are situated.

However, long-term trend remains bullish. We continue to be of the view that one Elliot Wave Cycle has been completed from Mar 03 to Mar 09. Given that we are currently in the initial stages of a new Elliot Wave Cycle – presently a Wave 1 – the forthcoming Waves 3 & 5 should therefore push the index up to higher levels over the longer-term.


Shanghai Composite Index: The 2,740 mark is within striking distance

Performance has been within expectations. Price action of the Shanghai Composite Index (SHCOMP Index) was inline with our forecasts as the index continued to attain new yearly highs after we had revised our Wave Count last week. Therefore, we would be sticking to this Wave Count (presently riding on a Wave 5) and we continue to expect further gains for the week – the bullish candlestick charting for the past fortnight by virtue of its series of successive higher highs and higher lows seem to concur with this view.

More capacity for further upside till 2,743. We had previously mentioned that the break above the 2,579 level would provide another push forward to the 2,743 mark. With the 14-day RSI still below overbought territory, we reiterate this call as we believe there remains room for additional gains to our resistance level. Any potential pullbacks, on the other hand, should be limited to the 2,506 support mark, courtesy of the confluence of the 14 and 21-day moving averages.


Dow Jones Industrial Average: Rally to extend

Uptrend remains. Our technical analysis on the Dow Jones Industrial Average (INDU Index) has been on the right track so far. The index continues to extend its gains brought over from last month which was inline with we have anticipated as mentioned previously. We therefore will be sticking to our Wave Count for now – with the current Wave 1 yet to be completed, we continue to opine that further upside is viable.

The DJIA is not yet overbought, according to the 14-day RSI which has stayed below the 70 mark. Additionally, the 14-day ADX currently with a reading of 18 has also started to turn up, signifying that a trend is solidifying. Of note, we highlight that the potential break of the ADX above its 20 mark would translate into a rather positive development for the DJIA, as this would be a testament to the strength of the present (bullish) trend.

Previous short-term target of 9,000 remains. We have not made changes to our resistance and support levels – the former is seen at the 8,996 – 9,015 range as represented by the 200-day moving average and the 38.2% retracement of Wave C. Support meanwhile is situated at the 7,791 – 7,804 area where a series of daily lows are located.


S&P 500 Index: A mirror image of the DJIA

The performance of the S&P 500 (SPX Index) was also within our expectations as it continues to follow in the footsteps of the DJIA – while the former had slightly outperformed the latter during the past several weeks, note that this deviation has now caused the technical indicators of both these indices to have a near perfect correlation. The RSIs of these two indices currently have an almost equal reading of 60 – 62, while the ADXs have also turned up around the same time. We therefore believe that the S&P 500 and the DJIA would resume their tendency to produce very similar price movements going forward.

Still bullish – targeting the 960 mark. Our resistance level and target is similarly pegged to the 200-day moving average and the 38.2% fibonacci retracement of Wave C, thereby resulting in the 956 – 961 level. On the other hand, support is located at the 830 – 835 level where the 100-day moving average and a certain daily low reside.


Hang Seng Index: Trend remains unclear

Direction remains ambiguous. The Hang Seng Index (HSI Index) managed to take out our previous resistance at 16,092 and break above its 200-day moving average. However, as noted in our earlier report when we wrote that its Wave Count had remained unclear, price action of the HSI for the past week was similarly not within our expectations. With the current Wave Count being ambiguous, we therefore prefer to monitor the index further before revising our Waves.

However, we expect the 200-day moving average to offer good support at the 15,870 level should the HSI were to encounter any price declines. On the other hand, initial resistance is just around the corner at the 17,682 mark as defined by the technical gap. Should this level be broken, additional resistance is seen at the 19,248 – 19,302 area, courtesy of a series of daily highs.















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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