STI: Resistance at 2800
S&P 500 futures for Monday (23Nov09) indicated a base has formed at the 1080
region. Short term momentum should be biased to the upside because of this. The
Dollar weakened in Monday's trading. A strong S&P 500 futures and weaker Dollar
helped to push the STI above its swing high to close at 2797, just short of resistance
at 2800. We elaborate more on the implications below.
S&P 500, Weekly, 20 November 2009
The chart above shows the weekly chart of the S&P 500 to give a bird's eye view of
price action.
The week closed with a rejection candle. Price tried to push beyond 1100 only to get
rejected by strong selling. The trigger level we are looking at is last week’s low at
1086. A push below 1086 should put the bias for the S&P 500 downward until the
1070 level where we have support.
However, intra day, the S&P 500 futures have shown on Monday (23Nov09), that
they are pushing higher off a base formed at 1080. Ideally we see a retest of last
week’s high in the 1110 region and a second test to trade beyond it.
STI, Daily, 23 November 2009
After the STI broke out above the 2745 mark, we were expecting a push to the
upside after a retest of 2745 as support.
However, the STI has been somewhat slow in pushing to the upside and has traded
sideways for the past week, indicating a lack of conviction for now. This relative
indecision increases the odds that the 2800 round number is going to act as a
resistance level.
Intra-day, the STI has pushed above the 2785 mark to make a new swing high of
2797. Just short of the 2800 mark. If the US session ends positive, we are likely to
see a push beyond 2800 for the STI today (24Nov09). We would like to see the STI
to use 2800 as support to push off higher.
Dollar Index, Daily, 20 November 2009
The Dollar closed higher last Friday (second candle from right). However, it pushed
lower strongly during the Asian session yesterday (23Nov09). As of this writing it is
continuing to push lower towards 75.00 where we might see a minor reaction due to
profit taking.
The main point to bear in mind now is that the general trend is biased to the
downside, and trends are more likely to continue than to reverse.
However, we are still watchful of the 74.50 to 74.00 region. We mentioned previously
that this is very heavy support, and there is a high probability of seeing a bounce
here. A sharp appreciation in the Dollar off this region is likely to have an adverse
effect on the equity markets, STI included.
Conclusion
Although the S&P 500 had a relatively bearish close on the weekly charts last week,
a closer examination of the intra-day charts has pointed out that a short term base
has formed and is likely to push higher. For short term momentum to remain bullish,
we would like to see a close above 1100 and for the S&P 500 to remain above last
week’s low.
The STI has pushed higher yesterday (23Nov09) on the back of a weaker Dollar and
rallying S&P 500 futures. 2800 is likely to act as resistance. 2800 turning from
resistance into support would corroborate the uptrend.
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