Technical View – Global Indices

Straits Times Index: Inflexion point at 2,703

Slightly off the mark. Our view that the Straits Times Index (FSSTI Index) was set to appreciate further was slightly off the mark as the index finished 1.3% lower for the week. However, with the present Wave 5 still expected to provide a lift to the STI, we would be maintaining our bullish call on the local market.

Strategy adopted dependant on risk profile. Nevertheless, we note that price action had failed to decisively produce a breakout above the 2,703 mark where the 100% fibonacci extension of Wave 1 is seen. As this level also resides within the 2,696 – 2,707 initial resistance area as further outlined by the upper bollinger band and the trading high attained in 2009 so far, we therefore recommend risk-adverse investors to engage in long positions only after this resistance region is broken above. On the other hand, however, aggressive traders may choose to enter the market now should they are able to withstand the short-term fluctuations that might drag the STI lower for the current week, although support at the 2,570 – 2,575 range (as defined by the lower bollinger band and the 50-day moving average) is not forecasted to give way.

Should the 1st resistance area be broken above, price action should then propel to the next resistance level at the 2,763 – 2,773 region. This is where an unfilled technical gap is located.


Shanghai Composite Index: Uptrend remains in place

Price volatility saw the Shanghai Composite Index (SHCOMP Index) hit a weekly high of 3,068 although it eventually finished with a 1.0% loss. With the current Wave 5 still at play while the MACD continues to appear positive, we therefore are not altering our bullish view on the index. Nevertheless, with the 50-day moving average now residing around present levels to serve as a barrier to the bullish price action, we recommend investors to adopt a short-term trading mentality while keeping their stop losses tight and advocate against leveraging up so as to minimise risk.

Initial resistance is outlined by the 50-day moving average at the 3,092 mark – should this level be broken, further resistance is located at the 3,146 – 3,150 area. Nonetheless, should price action turn bearish, support at the 2,923 – 2,936 area would be available to cushion any additional downside.


Dow Jones Industrial Average: Bullish momentum still intact

Step by step up the stairs. The Dow Jones Industrial Average (INDU Index) appreciated by 2.2% for the week – not surprising given that we were expecting a slow and steady climb as written in our previous report. With Wave 3 still expected to push the index up higher while the current momentum continues to gain traction as evidenced by the uptrend in the 14-day ADX, we therefore are maintaining our positive stance on the Dow Jones Industrial Average.

Medium-term resistance stays at the 10,796 – 10,825 region, as depicted by a series of daily highs. With the potential sizeable upside, we therefore advise investors and traders to buy on dips should there be an unexpected correction – support levels are situated at the 9,535 and 9,260 levels.


S&P 500 Index: Performing inline with the DJIA

Not unexpectedly, inline with the DJIA. As with the DJIA, the S&P 500 (SPX Index) also experienced a weekly gain as it appreciated by 2.5%. Other technical indicators similarly remain consistent – the 14-day ADX continues to trend up while the S&P rides on the current Wave 3. With the positive technical outlook, we therefore believe that the index is set for another week of gains.

Key levels to note. Our resistance level remains unchanged at the 1,153 – 1,160 area as defined by a series of daily highs. Support, meanwhile, has been identified at the 1,030 – 1,035 region as depicted by the 14-day moving average and the daily low on 14 Sep 09.


Hang Seng Index: Correction forthcoming, targeting 20,800

Set to hit lower ground. The Hang Seng Index (HSI Index) broke above our previous resistance at 21,546 while attaining a new high of 21,929 and closed the week with a 2.2% gain. Given that we believe that Wave 1 of 5 has been completed from 19,425 to 21,929, the incoming Wave 2 of 5 is therefore expected to drag the index down to lower levels in the short-term. With this bearish view, we therefore recommend short-term traders to cash out of the market at current levels.

Support is seen at the 20,774 – 20,825 region, courtesy of the 14-day moving average and a series of daily lows – this level is also just slightly above the 50% fibonacci retracement of Wave 1 of 5. Stronger support is also available at the 19,374 – 19,425 as represented by the lower bollinger band and the end of Wave 4. Resistance, on the other hand, is identified at the 21,860 – 21,929 range as seen from the upper bollinger band and the end of Wave 1 of 5.












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.

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