26-Mar-2009 Gmail - The EDGE Mid-Wk Comment …
Kwa Hwee Lay Huili <kwahweelay@gmail.com>
The EDGE Mid-Wk Comment Mar 25: Bear market
bounce?
1 message
The Edge <edge-sgonline@bizedge.com> Wed, Mar 25, 2009 at 9:10 PM
Reply-To: The Edge <edge-sgonline@bizedge.com>
To: Hwee Lay Kwa <kwahweelay@gmail.com>
The EDGE Mid-Week Comment
Bear market bounce or new young bull?
What is driving the market’s stunning rally? And is it another short-lived ‘dead
cat bounce’? Financials led this rally worldwide but it is now widespread
across many sectors. In Singapore, since the start of March, DBS ($8.42)
has surged 30%, UOB ($10.32) 25% and Oversea-Chinese Banking
Corporation (OCBC, $4.87) 19%. These gains pale in comparison with
Keppel Land ($1.43) which rocketed 42.7% within the same period.
Neptune Orient Lines rose a rose 31%, CapitaLand ($2.20) is 23.7%
higher and City Developments ($5.01) 26% within the month. The FSSTI
(1,691) on the other hand rose a more sedate 17%.
Since the start of the rally, the counter that has strengthened technically is
Keppel Corp followed by Sembcorp Marine, the world’s two largest
builders of jack-up rigs. Both stocks are above both their 50-day and 100-day
moving averages. Keppel Corp’s quarterly momentum is poised to move into
bullish territory and its smoothed annual momentum is in the process of
turning up. Unlike the banks, neither made new lows this March, a sign that
they had gained strength relative to the market. These could turn out to be
early leaders.
Bank stocks made new lows in Mar, as did the property counters. This leaves
them weaker technically than counters that didn’t make new lows. For
instance, although Keppel Land rose spectacularly this week, it is meeting
resistance at its 100-day moving average at $1.51 and that may be as far as
it can go. CapitaLand has moved above both its 50-day moving average and
is attempting to clear its 100-day moving average at $2.23. The 80 million
volume in shares traded on Tuesday may have been the successful breakout
needed. But it still has a distance to go before it attempts to challenge the
key 200-day moving average currently at $3.05. The indicator is declining at
the rate of one cent a day.
Dow Theorist George Schaefer has used the 200-day moving average as an
indicator to differentiate bull markets from bear markets and so far, the local
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26-Mar-2009 Gmail - The EDGE Mid-Wk Comment …
indicator to differentiate bull markets from bear markets and so far, the local
market has yet to make the grade.
On Tues, the FSSTI tested its 100-day moving at 1,700 and retreated. The
clue to whether the market is about to start a new bull or just in a bear market
rally should be out within the next three trading sessions.
On Tues, the FSSTI’s up-move created a small gap between 1,664 and
1,681. If that gap is not covered, it would turn out to be a breakaway gap –
these are rarely covered, and mark the onset of new trend. However there
has not been the crucial swing that will put the bear market once and for all
behind us. There is a need for a sustained break above the strong resistance
at 1,700 that would enable the FSSTI to test 1,800 successfully.
On Wednesday, the FSSTI closed slightly down at 1,691.68. Till that
materializes, it would be premature to term the current moves as part of the
new bull. Rather they are part of a bear market weakness that could
eventually pass.
Some stocks have actually moved above their 200-day moving averages, but
not in sufficient quantity to cause the broad market to strengthen. Wilmar
International has moved above its moving average, and Olam
International is challenging it.
Obviously, the Obama administration’s unveiling of more bailout details,
better coordinated G-20 policies to turn around the financial crisis as well as
the roll out of stimulus plans worldwide is giving the markets a firmer bottom.
Meanwhile the market has probably done enough to put dead cat bounces
behind it but stronger fundamentals are needed to sustain this rally. - Goola
Warden.
Disclaimer: The Edge Publishing Pte Ltd does not accept any liability whatsoever for any direct, indirect or
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