Uptrend if STI closes above 2283

The various markets are currently at key decision points. The USD is on the verge of trading below 81.87, the CRB is approaching 244 and the STI is just short of trading above 2283. A close below 81.87 for the Dollar, above 244 for the CRB and above 2283 for the STI would be various markets confirming to us that we have another leg up in equities. Watch for a close above these respective support/resistance levels.


S&P 500, Daily, 20 May 2009



After pulling back for a good part of last week, the S&P 500 had a strong close on 18May09, closing higher than the past 3 days of trading. The session on 19May09 closed neutral, marginally under the opening price for that day.

When we consider that the S&P 500 is currently still in an uptrend, the sessions on 18May09 and 19May09 can be considered bullish. The strong close on 18May09 can be interpreted as selling from the pullback running out of steam as new buying came in. 19May09’s session might be the market digesting the strong session on 18May09.

Our bias is with the trend and for it to continue. However, the S&P 500 will have to contend with strong upside resistance around 945 before it can head higher.


STI, Daily, 20 May 2009



The week thus far has been strong for the STI. Monday marked the end of the pullback/consolidation from testing the 2300 region (2283).

As mentioned in a technical report on 20May09, since the beginning of the up move from 1456, volume has been rising on all the advances while declining on all the pullbacks. This includes the recent pullback from 2283. Generally, it indicates to us that buying interest is still present in the market and that this current trend still has room to run.

The important milestone right now is for the STI to clear the 2283 level.

Should there be a decisive close above 2283, the next price target is the 2450 to 2500 region.


Dollar Index, Daily, 20 May 2009



The Dollar index continues to undergo a steady decline. Last week we saw the Dollar strengthen, this was off a bounce of the 82.00 level which also coincided with the 50 week moving average. This provided a good floor for the Dollar to bounce off.

However, since the beginning of this week, the Dollar has continued to decline, and on 19May09's session, it closed at about 82.10. This is very near the recent low of 81.87. The close around this region is bearish for the Dollar. It indicates to us that all the buying that came in around the 82.00 level has been washed out and the Dollar Index is likely to continue its down trend.

A strong close below 81.87 stands a very high chance of taking the Dollar Index significantly lower.

To re-cap quickly, the Dollar Index is declining from a massive double in the weekly charts. When the trend originates from the weekly timeframe, the trend usually is strong and lasts for a prolonged period of time.


CRB Index, Daily, 20 May 2009



The CRB tested key resistance at 244 and pulled back. This was in line with the typical inverse relation between the Dollar & CRB.

Whilst the Dollar tested and rallied off key support at 82.00, the CRB simultaneously tested key resistance at 244 and pulled back as well.

The CRB continued to exert its influence on the equity markets during this period of time. In addition to coinciding with the Dollar's test of 82.00, the CRB pullback from 244 also coincided with both the S&P 500 and STI's respective pullbacks as well.

The commodity market is a proxy for growth. A close above key resistance at 244 would communicate that sentiment for growth is positive and this in turn should provide a tail wind for the equity markets to continue running up as well.








Conclusion
At this juncture, the various markets are at key levels that will decide whether or not current trends will continue.

The Dollar Index has tested 82.00. A close below the recent intra-day low of 81.87 would confirm the continuation of the downtrend in the Dollar.

For commodities, the CRB Index has tested the 244 level, sold off and rallied back up to 241. A close above 244 also stands a high chance of pushing the broad commodity complex higher.

At the same time, the STI is currently hovering below recent highs of 2283. A close above 2283 should precipitate another leg up in the STI with key resistance (and price target) at 2450 to 2500.

A weaker Dollar, stronger commodity market and close above 2283 for the STI would be the broad macro picture telling to us that we have another leg up. When these major markets confirm the same message to us, the probability of a run up in the STI occurring is high.

In addition, the weekly trend is also in our favour, further adding to the probability of a continued equity rally once we close above the various key support/resistance levels mentioned above.

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