Technical View – Global Indices

Straits Times Index: Profit-taking to kick in

Against our forecasts. Our expectations that the Straits Times Index (FSSTI Index) would be confined to a 1,512 – 1,654 range was clearly off the mark as the index rallied strongly with a 9.3% increase during the previous week. Additionally, it is also probable that the Wave 5 of C may have already been completed when the STI attained its low of 1,455 earlier in Mar 09 and that the ensuing new Wave 1 which the index is currently riding on could translate into further upside.

We expect the STI to forfeit some ground for the current week. However, given that the STI started paring off some gains during last Friday, it is also possible that a sub-Wave retracement within the new Wave 1 is at hand, which we believe to be the case. This also indicates that that the index is likely to register a decline for the present week. A viable price target would be the 23.6% fibonacci retracement of Wave 1 at 1,702 [ derived from 1,779 – 23.6% * (1,779 – 1,455) ] which also coincides with the 100-day moving average. Should this support level be taken out, we identify further support at the 1,575 – 1,608 range as represented by a technical gap and the 61.8% fibonacci retracement of Wave 1.


Shanghai Composite Index: Gunning for the 2,473 mark before end-April

Price action was as anticipated. Our forecast that the Shanghai Composite Index (SHCOMP Index) was on track to break the 2,306 level as written in our previous report proved to be correct as the breakout move from the Symmetrical Triangle formation continues to extend. We would be sticking to our Wave Count for now, as we note that the present uptrend seen in the current Wave 5 looks set to gain further ground.

Targeting 2,473 by mid-April. With Waves 5 usually equating to the 100% move of Waves 1, we therefore believe that the index could actually appreciate to the 2,473 resistance level [ derived from 100% * (2,100 – 1,664) + 2,037 ]. On a probable time frame, given that the previous Wave 1 (see table above) took around 1.5 months to be completed and that the current Wave 5 began during early Mar 09, we arrive at the conclusion that this price target should be fulfilled by mid-April.

Technical indicators still positive. The 14-day RSI remains below the 70 mark, indicating that the index is not yet overbought. Additionally, the 14-day ADX has also started to move up, implying that the current (bullish) trend is strengthening. Nevertheless, should price action turn bearish, initial support is found at the 2,275 level where a series of daily lows reside. Additional support is also available at the 2,220 mark where the 30-day moving average and another series of daily lows are situated.


Dow Jones Industrial Average: The worst may already be past us

Performing as expected. Our call for the Dow Jones Industrial Average (INDU Index) to register some short-term gains was in the money as the index appreciated some 6.8% last week. With the various technical indicators remaining bullish and not yet overbought, we are of the opinion that further upside may still be possible for the current week before a pullback occurs.

The DJIA may have already bottomed out. As mentioned in our previous report, we have highlighted that the Wave 5 of C has more then satisfied the preferred movement required of the Wave 1 of C as it had overshot the 100% fibonacci extension of the latter. We are now altering our preferred Wave Count, as we believe that this Wave 5 of C may have actually ended when the index hit a low of 6,469. This in turn suggests that one Elliot Wave Cycle has been completed and that the DJIA could have already bottomed out during early Mar 09.

Key levels to note. Initial resistance is seen at the 8,087 – 8,124 range, courtesy of the 61.8% fibonacci retracement of 9,088 to 6,469 and the 100-day moving average. Should this barrier be broken, additional resistance is identified at the 8,446 – 8,470 area as represented by the same fibonacci retracement move (but of a different magnitude) at 76.4%. On the other hand, support is situated at the 7,257 – 7,278 level where the 30-day moving average and a series of daily lows reside.


S&P 500 Index: Could possibility hit the 877 level

Inline with forecasts. The S&P 500 Index (SPX Index) continues to track the fortunes of the Dow Jones Industrial Average as most have expected. As with the DJIA, we also believe that the S&P 500 may have already bottomed out during early Mar 09 when it attained its 12-yr low at the 666 mark. We therefore are also revising our Wave Count for the S&P 500, resulting in an almost entirely similar outlook to the DJIA.

Further upside possible. Despite the heady gains made during last week, the 14-day RSI continues to trade below the overbought line while the MACD chart had recently produced a bullish centreline crossover, implying that the current positive trend could be extended. A viable target price and resistance level is seen at the 875 – 877 area, courtesy of the 76.4% fibonacci retracement from 943 to 666 and the daily highs on 28 Jan and 10 Feb 09. Meanwhile, in the event that price action turns bearish, support is located at the 791 mark where the 50-day moving average is situated.


Hang Seng Index: Further gains may be improbable in the short-term

Running out of gas. Our expectations that the Hang Seng Index (HSI Index) would enter into a consolidation phase were not met as price action broke above our previous resistance level of 13,560. During this uptrend, the index had continually penetrated through the upper bollinger band – given that the 14-day ADX still remains below the 20 mark which implies that the current trend is weak, we therefore do not think that such a phenomenon is sustainable in this case. This in turn suggests that the index could stop short of making any additional gains in the short-term.

Resistance at the 14,673 – 14,755 range as depicted by a series of daily highs is not expected to be broken through. On the other hand, any bearishness should find initial support at the 13,538 – 13,578 region where a technical gap and the 100-day moving average is located. Stronger support is also available at the 12,968 – 13,001 area where the 50-day moving average resides.

Longer-term Wave Count is ambiguous. It remains unclear as to whether or not the Wave 5 of C may have resulted in a Wave 5 failure when it hit the 11,344 mark during early Mar 09 but failed to break the low of 10,676 seen during Oct 08. Nevertheless, we are sticking to our original Wave Count for now until more conclusive developments take place.















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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