STI – Trending up cautiously

The STI has been trading cautiously higher in the direction of the prevailing uptrend. Market breadth has generally been light with a only handful of stocks participating in the gradual uptick in prices. Gainers have been marginally higher than losers as well indicating that there is still uncertainty in the advance. The 2400 to 2424 region is the nearest resistance level. We advise investors to keep bets light with a long bias.


S&P 500, Daily, 30 June 09



In the past week, momentum in the S&P 500 looks like it might be beginning to pick up. This can be seen through price action where the S&P 500 rejected the 888 level and made a strong close 2 sessions later in the form of a full white candle.

30June09’s trading session tested resistance at 930 and sold off slightly. Ideally, we would like to see the S&P 500 close above 930 in the next trading session as this would be an indication that buying pressure is picking up.

The S&P 500 should not close below the 879 mark. We will have to reassess price action again should the 879 mark be breached.


STI, Daily, 1 July 09



Recent price action for the STI and also for stocks across the board has been choppy, with a general upward bias.

Last week we saw the break of 2237, which was an interim low. This should have indicated that momentum was switching gears to the downside. Instead, the STI found support off the 2211 mark, which was light support and subsequently traded higher. For the market to bounce off light support tells us that there is some strength present in the STI.

However, despite the STI trading higher from last week, market breadth is still rather weak at this point, with almost all the first and second tier stocks trading side ways, even on an intraday basis.

What would convince us that there is a good probability of another leg up, is a close above the recent high of 2424 with confirming market breadth. This would indicate to us that price action is realigning with the trend. The breach of new highs also tends to draw money out from the sidelines, adding to the buying pressure.

Until then we advise investors to keep bets light.


CRB Index, Daily, 30 June 09



The commodity market is trading rather similar to the equity market in terms of trend at this point in time. There is a general upward bias due to the uptrend that has been ongoing since late March09, however, immediate price action has been choppy with what seems to be the lack of conviction in both bull and bear camps.

The CRB has pulled back from its high of 266 and is currently still consolidating.

Immediate support is at 246 and a close above 255 should indicate that momentum is beginning to pick up again.







Conclusion
There seems to be a fair bit of uncertainty in the markets right now. The STI has been continued advancing in the direction of its uptrend but price action has been rather weak. This tells us that the market is still rather cautious about advancing. What we would like to see is the breach of the recent high of 2424. This is usually an indication of strength and should be sufficient to draw money out from the sidelines and back into the market to push it higher.

Other elements of the inter-market picture namely commodities and the US Dollar are also conveying the same message of uncertainty. We will have to be patient and wait for price action to realign with the prevailing trends. The trend in the equity markets will likely be the strongest when the CRB and US Dollar resume their respective trends as well.

It is during the times when price action is aligned with the prevailing trend that the probability of making profit is the highest. Until then, we advise investors to keep bets light and watch the 2424 mark on the STI.

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