08/04/2009 Market Update

Things took an unexpected change during the last trading hour today. From an initial total loss of over 47 points, STI got pushed up to close near day high at 1,783, with a loss of only 18 points. This is considered as a last minute key day reversal - suspiciously impressive to me. Most index stocks got matched up at closing. Volume turnover is starting to come down at 1.08 billion shares worth $973.04 million.

I find it hard to believe to see STI closing above the 1,780 support. There are some mixed signals in the market now, and I shall attempt to lay them out to everyone. So far for the "down" days, the volume traded has been low. This either means all the buyers during the "up" days were genuine buyers, or the stuck traders have not reached a desperate stage to sell yet. If the latter assumption is true, at least we know the market has not consolidated finish. But if all the previous buying originated from genuine investors, our performance today might have hinted that the pullback had
ended.

So what do we do now? To chase or not to chase?
It will depend on how the US fare tonight, and of course individual's risk appetite. Our performance today probably discounted a relatively weak Wall Street performance. I guess if the US does not close down by 100 – 200 points tomorrow morning. Chances are our market will stabilize fairly quickly and recover from here on. I think 1,780 will be an important reference to monitor. Should you notice that the STI is unable to break below 1,780 again, and seems to be starting to gain strength from here, I will suggest that we start grabbing some blue chips, especially the bigger
banks and property counters straightaway. It is also worthy to know that at closing today, a few blue chips that are on my buying list, have tested and managed to rest above the point whereby their 14-day exponential moving average (EMA) and 14-day simple moving average (SMA) intercepts. I think these points are crucial supports to them currently. Should STI breaks below 1,780, these counters will probably break below the interception points too. If the contrary is true, these stocks will bounce back up very quickly.
Ideally, we should park our buy queues at these crucial supports and see if luck is on our side. Alternatively, you have to watch very intently on the strength on the STI and react accordingly - grab some straightaway on rebound, or queue in early at the next strategic point once the current support breaks.

Note: Kindly read my first post, About Myself, on my disclaimer. Thank you.