Lower-liners buoy sentiment

Although the Straits Times Index eased in the past five trading sessions, from 3,300 to 3,280, the market remained buoyed by rotational interest. Gallant Venture could attract interest, dealers say. Technically, it is at a breakout level at the 34-to-35-cent range. A successful breakout would take prices above 42 cents. Market observers believe that the company’s auto unit, which listed last December in Indonesia, could be bringing in a US brand.

Olam International’s share price has been rising sharply, following the close of Temasek’s offer to acquire the company on May 23 at $2.23 a share. It is now 9% higher and elicited a query on its trading from the Singapore Exchange on June 5. Olam’s outperformance spurred interest in Noble Group, which is now at a one-year high at $1.47. An earlier break above the top of the base at $1.28 indicates a target of $1.76, which is still below its five-year high of $2.34.

Jubilee Industries will no longer be acquiring property in Iskandar through a reverse takeover. Instead, WE Holdings acquired a 25% stake in Jubilee. Interest in Singapore Post and the e-commerce theme has abated, but could pick up again in August, when Alibaba announces the date of its IPO.

The STI’s break still looks good, despite the pullback towards 3,279 to 3,280. The breakout level was 3,283, and prices may still regain this level.

The Hang Seng Index (23,109) remains within a resistance area of around 23,100 at the top of a sideways range. A successful breakout may not materialise immediately, as short- term indicators have turned down. Support is at the flat 200-day moving average at 22,714. An eventual breakout on the upside would indicate a target of 25,000 but this should be viewed as a medium- to longer-term objective.

VIX COULD RECOVER

The Volatility Index (12.08) has moved up off the 11 level. Its 21-day RSI is turning up after a series of positive divergences, and short-term stochastics has turned up a low level. These indicators could support a rebound towards 14.4. ADX is in single digits, and remains near the low end of its range, suggesting that the rebound is unlikely to gather momentum.

Dow attempts to challenge resistance The Dow Jones Industrial Average (16,737) is attempting to move above its four-times-tested resistance level at 16,576 to 16,600. However, the index does not have sufficient strength to stage a clear break. In addition, RSI and ROC are not providing any support to lift prices. ADX is turning up from the low end of its range. If the DIs stay positively placed, that could help to trigger a breakout. Till then, the upside is limited, and support is at 16,576.

The Standard & Poor’s 500 (1,927) has cleared a several-times-tested resistance at 1,880. The move completes an ascending triangle, which is a continuation pattern in an uptrend. The break indicates an upside of 1,945. ADX has turned up, and the DIs are positively placed, suggesting that the upmove could have legs. Support is at 1,880, below which the target is invalidated.

STI (3,280)

Long term: upturn; medium term: downturn; short term: downturn

SHORT TERM

RSI (Chart B) is turning down after a negative divergence. ADX (Chart B) has flattened and the DIs are turning positive. Stochastics (Chart B) is turning down from the top end of its range.

MEDIUM TERM

Quarterly momentum (Chart A) has turned down from a high level.

LONG TERM

Annual momentum (Chart C) has turned up. 24-month ROC (Chart C) is flat. (See Charts A, B and C)

The STI’s indicators are off-kilter. Annual momentum has shown a change in trend, and has turned up from near its equilibrium line. Its own moving average is still flat, but overall, this signal should be viewed positively.

The longer-term, 24-month ROC is flat but with an upward bias. Unfortunately, quarterly momentum appears to be losing strength. It has started to turn down after staging a negative divergence with the index.

Since annual momentum has turned up, a sharp decline should be prevented even if quarterly momentum fails. Elsewhere, 21-day RSI is also turning down after forming a negative divergence with price, and 5-day stochastics is turning down from the top end of its range.

The STI’s break above the 3,282-to-3,283 level should still be viewed as good unless the index closes below 3,280 in the next few sessions. There is an upside of 3,390. The index touched 3,454 in May last year.