Technical View – Global Indices

Straits Times Index: Pertinent resistance ahead, risk-to-reward ratio not favourable

An 82-point weekly gain. The Straits Times Index (FSSTI Index) performed against our bearish forecasts as it appreciated by 3.2% for the week although the pertinent 2,700 resistance mark managed to hold. Until this level is broken, our view that the STI is still riding on a corrective Wave A that would in turn translate into bearishness for the index remains.

With less than 70 points away to the 2,700 mark, we are of the opinion that the risk-to-reward ratio for engaging in long positions at current levels is not favourable. We therefore recommend investors to stay out of the market for now, while those looking to accumulate should do so at lower levels after the potential correction period is over.

The 2,700 resistance level as represented by the end of Wave 5 is expected to hold its ground and cap any additional upside. Immediate support, meanwhile, is located at the 2,484 – 2,503 area where a technical gap resides. Should this level be broken, stronger support would accordingly be found at the 2,398 and 2,211 levels.


Shanghai Composite Index: Remains bearish, initial target at 2,930

Our bearish call on the Shanghai Composite Index (SHCOMP Index) was on the dot as the Double Top formation that we had previously warned came into play and dragged the index to a 6.6% weekly loss. Coupled with the present Wave 4 which is also expected to pull the index down further, our bearish technical view of the market therefore remains unchanged from the previous week.

Additionally, the 14-day RSI has also yet to hit the oversold mark, indicating that the possibility of a technical rebound remains low. We therefore advocate investors to close their existing long positions before the current sell-down magnifies itself while awaiting a better entry point.

Targeting the 2,928 level. Initial support and target is seen at around the 2,930 level as depicted by the 38.2% fibonacci retracement of Wave 3. In the event that this level gives way, the index would next target stronger support at the 2,810 – 2,817 region as depicted by the 100-day moving average. On the other hand, should the index experience an unexpected technical rebound, resistance at the 3,248 – 3,255 range would be present to cap any further upside.


Dow Jones Industrial Average: Remains overbought

Wave Count remains unchanged. The Dow Jones Industrial Average (INDU Index) finished the week from almost where it started as it depicted a rather flat closing with a 49-point weekly loss. With the 14-day RSI still in overbought territory while immediate resistance is just less than 230 points away from the Dow’s previous close, we continue to recommend against entering the market at present levels.

Our initial support level stays at the 8,857 – 8,880 region as outlined by the 30-day moving average and a series of daily lows while more robust support as represented by the 200-day moving average is also available at the 8,285 – 8,311 area. On the other hand, immediate resistance is defined by the 100% fibonacci extension of Wave 1 at the 9,549 mark.


S&P 500 Index: Looking flat

Consolidation may be at hand. As with the Dow, the S&P 500 (SPX Index) turned in a lackluster performance and closed just 6 points lower for the week. Going forward, with the bollinger bands tightening up while the MACD chart is emitting a flattish signal, we therefore are not expecting any pronounced gains for the week. Furthermore, we believe that the corrective Wave A could be kicking in anytime soon after the present Wave 5 ends.

Key levels to be noted. Initial resistance is just around the corner at the 1,027 – 1,035 area as identified by the 100% fibonacci extension of Wave 1 and the upper bollinger band. Support levels, meanwhile, are seen at the 943 and 907 – 910 levels respectively.


Hang Seng Index: Outlook has not turned bullish

Against our expectations. The Hang Seng Index (HSI Index) gained 518 points for the week and did not perform inline with our bearish forecasts. However, as the HSI did not break above our resistance level, we will not be revising our Wave Count and we continue to believe that the current Wave 4 is still at play and that the index is set to experience a downtrend.

Trend is not strong. Despite the 2.5% increment seen by the HSI for the week, the 14-day ADX has yet to turn up in concert, thereby signaling that this uptrend is weak. Additionally, our resistance and support levels also stay relatively unchanged from last week – resistance remains at the 21,196 mark while support levels are identified at the 19,606 and 18,855 – 18,960 areas respectively.













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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