04/05/2009 Market Update

	Close	Change	Low	High
STI	2,028	+108	1,930	2,039

	Shares	Value
Volume Traded	2.82 billion	$2.33 billion

A dizzying day after coming back from a lengthened weekend break. Apparently, our strength today came from tracking Asia Ex-Japan markets as a result of continual confidence that the global economy is recovering faster, being led out by China's recovering economy and investment power. Due to this reason, there have been foreign funds influx into the Asian Ex-Japan markets recently because the fund managers had identified our region to generate growth earlier than other markets. These factors encouraged investors to brush aside worries that the global H1N1 flu outbreak could turn into a serious pandemic. In fact, there are claims that Mexico has turned the corner with regards to the flu outbreak issue already.

As seen in the table, our volume today spiked up due to foreign funds' interest. Their power is strong enough to move our market in such a huge way, just like how they moved Shanghai and Hong Kong today – 82 points (3.3%) and 860 points (5.5%) respectively.

Here are my thoughts for today:

For a start, I feel that the market has been overbought. The break upwards today was simply too fast too furious. The funds which bought up the market so quickly, can also throw down things as quickly. The problem is we don't know if they intend to hold for good, or if they want to throw back down, when? Technically speaking, the STI has gapped up twice in a roll, and we gained around 200 points within 3 trading days. Don't you think that the market is getting irrational? In addition, I think STI resistance at its 200-day MA at 2,030 region is fairly strong. We tested it today before closing below it again. While I think it is possible for STI to retest or even breach above this resistance to touch 2,140, my gut feel is that this would be a temporary move only because fundamentally, it doesn't seem logical to me that the chart can stay above its 200-day MA. In short, I am getting more and more bearish every time the index goes higher. The possibility of some correction/pullback setting in as we near 2,140 gets higher and higher. Hence, I will recommend a gradual sell-into-strength strategy as the market climbs higher. Take profits off the table bit by bit so that on one hand we lower our risk, and on the other hand, prevent ourselves from missing out the fun totally. Otherwise, I think the chances of shorting the ES contracts successfully are getting higher, especially when the May contracts still has quite a way to go. For the buyers, we will either buy on pullbacks or switch into contrarian mode. The defensive vs. high beta stocks strategy is worth considering now.

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