Technical View – Global Indices

Straits Times Index: Sell into strength

Against all odds. The Straits Times Index (FSSTI Index) performed contrary to market expectations and our forecasts as it ended the previous week with a 1.8% gain. Nevertheless, we note that the 14-day RSI is still portraying a neutral tone, signaling that the momentum has yet to turn bullish. More importantly, Wave A appears to have kicked in after Wave 5 had ended during last month, implying that the STI may register losses going forward in the short term – this analysis is further strengthened by the fact that Waves 5 usually equate to the 100% of Waves 1 (1,947 minus 1,455 is almost equal to 2,707 minus 2,211).

We therefore recommend investors to adopt a sell-on-strength mentality should the STI were to build onto the gains it experienced last week as the rally has not been a convincing one. Furthermore, with immediate resistance at around the 2,700 mark that equates to just a 2% upside from current levels, the risk-to-reward ratio is not favourable for those looking to engage in long positions. The support levels, meanwhile, are located at the 2,600 and 2,529 – 2,532 levels respectively.


Shanghai Composite Index: A potential revisit above the 3,000 level

Looking bullish. The Shanghai Composite Index (SHCOMP Index) resumed trading on last Friday and gapped up in response to the rallies seen in the various global indices during the previous week. We have labeled the various subwaves within the current Wave 5 and the index now appears to be riding on a Wave 3 of 5, indicating that a short-term rally remains on the cards before the next Wave 4 of 5 kicks in. Additionally, the MACD chart is also signaling a potential bullish moving average crossover, lending further credence that this uptrend still has legs. We therefore believe that the 3,000 level would be broken above and that investors should participate in this ongoing rally given the potential 150-point upside before the resistance level is met.

Resistance remains at the 3,064 – 3,068 region as depicted by a series of daily highs. Support, meanwhile, has been identified at the 2,803 – 2,834 area where the technical gap that had appeared on last Friday resides.


Dow Jones Industrial Average: The 9,920 level may not be broken through

Gains may not hold. The Dow Jones Industrial Average (INDU Index) performed against our bearish forecasts and finished the week with a 4.0% gain. While we would be sticking to our Wave Count with the index still riding on a Wave 3 for now (which in turn suggests of more upside to come in the medium term), note that the 14-day ADX has not trended up in concert with the rally seen during the previous week, an indication that the short term picture has not turned decisively bullish.

Resistance is situated at the 9,896 – 9,917 range as outlined by the upper bollinger band, a level which we do not expect to be broken above. On the other hand, support has been identified at the 9,506 – 9,516 area, courtesy of the 50-day moving average and the lower bollinger band.


S&P 500 Index: Immediate resistance just ahead

Not a convincing rally. The outlook of the S&P 500 (SPX Index) continues to correlate to that of the Dow. After appreciating by 4.5% for the week, our Wave Count remains unchanged (presently also at Wave 3) although the 14-day ADX has similarly not trended up in tandem with the gains seen in the index. We therefore also opine that the short term picture has not turned decidedly positive.

Key levels to monitor. As represented by the upper bollinger band and the yearly high seen on 23 Sep 09, resistance is now located at the 1,080 mark. Meanwhile, support is found at the 1,028 level as outlined by the lower bollinger band and the 50-day moving average.


Hang Seng Index: Point of inflexion at 21,960

The Hang Seng Index (HSI Index) rallied hard with a 5.5% gain for the week after being propelled by a technical gap. While the present Wave 5 is still expected to push the index up to higher ground, however, we note that immediate resistance is just less than 500 points away from current levels. We therefore recommend investors to enter the market only when this resistance area is taken out, as a break above this level would greatly strengthen the bullish momentum.

The resistance level is located at the 21,929 – 21,960 region as derived from the upper bollinger band and the yearly high on 17 Sep 09. Should sentiment turn negative, however, support at the 20,824 – 21,072 area would serve to limit any further downside.














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



This research is for general distribution. It does not have any regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report.

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.

This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities, DMGAPS and its affiliates, their directors, connected person and employees may from time to time have interest and/or underwriting commitment in the securities mentioned in this report.

DMG & Partners Securities Pte Ltd is a participant in the SGX-MAS Research Incentive Scheme and receives a compensation of S$5,000 per stock per annum covered under the Scheme.

DMG & Partners Securities Pte Ltd is a joint venture between OSK Securities Berhad (a subsidiary of OSK Investment Bank Berhad) and Deutsche Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange Securities Trading Limited.

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