by KELive Research (22 July)
THE Straits Times Index (STI) fell below our target of 2,832 to 2,819, and then rebounded as expected.To recap, global markets went into a tailspin last week over concerns that Fannie Mae and Freddie Mac may be nationalised and mortgage-backed securities would face another cycle of de-rating. Fortunately, crude declined from US$147/bbl and closed at US$128.88/bbl, easing sentiment to some extent.
These developments have not swung our view on the market's downtrend. We believe the rebound is likely to be short-lived as the STI is fast approaching the resistance levels of 2,960 and 3,000.
The good news is that the STI may have found bottom at 2,819 for the short term as bullish divergence has been detected in the RSI; MACD indicators are also positive at the 2,800 levels.
Any rebound should be a selling opportunity for investors.
There are adverse implications of 2,946 failing because this support level represents the 61.8 per cent Fibonacci retracement of the March-May advance. Based on Fibonacci theory, we now believe there is a high likelihood of the STI falling towards 2,745.
Sell into strength.
-Research Report by KELive Research (22 July)
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