Technical View – Global Indices

Straits Times Index: Resistance point at 2,703 remains key

While its gains were unimpressive, the Straits Times Index (FSSTI Index) eventually performed inline with our bullish expectations as it appreciated by 0.6% for the week despite having failed to take out key resistance at the 2,703 level. Price action of the STI was also confined to a mere 60-point trading range within a 2,638 – 2,698 band for the whole week as technical indicators and candlestick charting failed to provide any meaningful insight on the underlying trend. Nevertheless, we would be maintaining our bullish technical view on the STI as we believe that the present Wave 5 which is currently still at play is set to propel the index.

Our recommended strategy as written in our previous report remains – aggressive traders may choose to enter the market at current levels should they be able to undertake any short term fluctuations while those whom are riskadverse may buy upon the break of the 2,703 resistance mark, as we believe that this potential bullish breakout would push the STI up to around the 2,770 resistance level. On the other hand, support at the 2,580 – 2,600 area is expected to cushion any potential selling pressure.


Shanghai Composite Index: Selling momentum to weaken, strong support below

Our bullish forecasts of the Shanghai Composite Index (SHCOMP Index) was off the mark as the index dropped by 4.2% for the week. While our bullish stance over the medium term is unchanged by virtue of the present Wave 5 remaining at play, we note that the existing negative outlook is likely to stay on for the current week as depicted by the bearish moving average crossover within the MACD chart. On a brighter note, with only three trading days in the week, we believe that the intensity of the sell-down may diminish due to the decline in trading volume as traders may choose to stay out of the market altogether. We also recommend that potential investors should avoid the market for now and await its reopening on 09 Oct when trading resumes.

Support is robust at the 2,570 – 2,639 region as this is where the 200-day moving average and the end of Wave 4 are situated. Resistance, meanwhile, is depicted by a series of daily highs at the 3,064 – 3,068 area.


Dow Jones Industrial Average: Any dips to be regarded as buying opportunities

Minimal changes to our forecasts. The Dow Jones Industrial Average (INDU Index) closed the week with a 1.6% loss although its various technical indicators had barely budged – the lower bollinger band remained practically flat throughout the week while the 14-day ADX had only trended up slightly, nevertheless indicating that the underlying momentum remains mildly positive. In the longer term perspective, however, we remain bullish by virtue of the current Wave 3 that the index is presently riding on – investors should therefore continue to regard any dips as buying opportunities.

Medium-term resistance remains at the 10,796 – 10,825 area, as outlined by a series of daily highs. The support levels are also little changed at the 9,528 – 9,535 and 9,252 – 9,270 regions as with the previous week.


S&P 500 Index: Remains in lockstep with the DJIA

Price action inline with the DJIA. Similar to the DJIA, technical indicators of the S&P 500 (SPX Index) also turned in a somewhat muted performance after the 2.2% weekly loss. The 14-day ADX, however, did trend up marginally, signaling that the underlying momentum remains moderately positive. Additionally, in accordance to the present Wave 3 that the S&P is still currently riding on, we continue to maintain our bullish technical outlook on the index.

Key levels to monitor. Resistance level stays at the 1,153 – 1,160 area as derived from a series of daily highs. Similarly, support also remains at the 1,030 – 1,035 range as defined by the daily low on 14 Sep 09 and the 30-day moving average.


Hang Seng Index: Consolidation within 20,549 – 21,765

Performing as anticipated. Our forecasts on the Hang Seng Index (HSI Index) was almost on the dot as it fell to a low of 20,766 for the week and reached our 20,800 target level (see previous report) before finishing off with a 2.8% weekly loss. Going forward in the short term, with the lack of leads from the China market due to the national holidays, we believe that the HSI may enter a consolidation period – this is further evidenced from the neutrality seen within the 14- day RSI.

Resistance is seen at the 21,704 – 21,765 region as identified by a series of daily highs. Support, on the other hand, is found at the 20,549 – 20,667 range where the 30 & 50-day moving averages are located. We therefore opine that consolidation would be within the 20,549 – 21,765 trading band.












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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