Technical View – Global Indices

Straits Times Index: Technical gap has been filled, initial target now at 2,600

Closing price of 2,533 on last Friday was exactly inline with our forecasts. We had previously wrote that should the Straits Times Index (FSSTI Index) stay above the 2,424 level, the ensuing bullish momentum would encounter initial resistance at the 2,533 level where a technical gap is situated – this eventually panned out right inline with our expectations. Currently with the STI still riding on a Wave 5, we believe that the present uptrend has not yet run its full course.

Technical indicators are positive. The runaway gap that appeared on last Friday is also expected to propel the STI further. Additionally, the MACD chart is similarly generating a bullish signal – we therefore recommend vested investors not to jump ship yet while those looking to enter the market should do so at current levels before the STI hits an overbought condition.

Key levels to note. Initial resistance is now identified at the 2,605 mark where a series of daily highs are seen. North of that, further resistance in the form of the 100% fibonacci extension of Wave 1 at around the 2,700 level would be the next target. On the other support, immediate support is located at the 2,443 – 2,455 region where a series of daily lows are outlined. Additional support at the 2,380 – 2,389 area as represented by the 14-day moving average would also be available to cap any selling momentum should an unexpected downtrend occur.


Shanghai Composite Index: Defying gravity

Defying gravity, but for how long? Technical considerations have once again been ignored as the Shanghai Composite Index (SHCOMP Index) recorded yet another week of gains despite having traded in an overbought territory for the last 20 odd trading days – we had not expected such. Presently, while the 14-day RSI is almost close to the 80 mark, the bollinger bands which are trending up do suggest that there remains room for further upside.

Trend is still bullish, but... With the current Wave 3 having cleared our quoted resistance at the 3,231 – 3,245 area after exceeding the 161.8% fibonacci extension of Wave 1, resistance would be now seen at the 3,481 – 3,486 region as defined by a series of daily highs. Nevertheless, we recommend only those with an aggressive trading stance to engage in long positions at present levels as the overbought condition of the index continues to worry us. We believe that any potential pullbacks would be swift and steep as a correction seems long overdue. Should that occur, some support at the 3,190 – 3,207 range would be available to cap any downside pressures.


Dow Jones Industrial Average: Trend remains bullish

Continues to make gains. The Dow Jones Industrial Average (INDU Index) rallied inline with our forecasts as trading momentum continued to be positive. The candlesticks stayed bullish as another consecutive set of higher highs and higher lows were recorded, indicating that the uptrend channel remains intact. The appreciation in the 14-day ADX is yet another symbol that this uptrend is strengthening.

Targeting the 9,549 level. We continue to recommend short-term investors to ride on this uptrend before the current Wave 5 within the Dow ceases at the 9,549 resistance level as defined by the 100% fibonacci extension of Wave 1. In the event that price action turns bearish, however, support at the 8,512 – 8,516 area would be present to limit any pronounced downside.


S&P 500 Index: Set to reach the 1,000 mark

As with the Dow, our Wave Count for the S&P 500 (SPX Index) stays unchanged with its outlook also looking to be bullish. The MACD chart remains positive after having produced a centreline crossover recently, while the uptrend channel seen within the candlesticks signal that the S&P should continue to move higher.

The 1,000 mark is within striking distance. Initial resistance is seen at the 1,001 – 1,007 area where a series of daily highs reside. Should this level be broken, further resistance at the 1,035 level as outlined by the 100% fibonacci extension of Wave 1 would serve to cap any additional upside. Meanwhile, support has been identified at the 918 mark as defined by the confluence of the 14, 21 and 30-day moving averages.


Hang Seng Index: Break of the 20,000 mark signals more upside ahead

We had grasped the bullish trend of the Hang Seng Index (HSI Index) correctly although the magnitude of the ascent turned out to be greater than our expectations as our previous resistance level at 19,870 was broken through while the psychological 20,000 mark had also given way. With the 14-day ADX trending up which signals that the (bullish) trend is strengthening, we believe that further gains should be in store for the HSI.

The coast is still clear. The current Wave 5 is expected to push the HSI up further where resistance is seen at the 20,840 – 20,964 region as represented by a series of daily highs. On the other hand, any short-term declines are expected to be capped at the 18,885 – 18,960 support area where a technical gap resides.















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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