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Straits Times 3,116.78 -10.96 -0.35%
Hang Seng 26,173.59 +124.87 +0.48%
Dow Jones 26,252.24 +49.51 +0.19%
Shanghai Composite 2,897.14 +13.71 +0.48%
Healthy Consolidation Ahead For The STI
Trend Spotting | 07 May 2010
By: Xavier Lim
Articles (51) Profile

Immediate support line. Technically, the chart suggests that the STI is still within the bullish trend. Immediate support at around 2,810, which coincides with the 150-day moving average. The chart at the bottom also shows that Dow Jones Industrial Average is within its bullish trend channel. Immediate support level will be at its psychological level of 10,500.

Consolidation. We believe that if the STI falls below 2,810, it will probably test the next support line at 2,700. Thereafter, the market will go into a consolidation phase, hovering between 2,700 and 2,810.

Fundamentals holding strong. Investors dumped stocks on fear that even with a bailout for Greece, Europe’s debt crisis could spread to other weak euro zone countries. However, the latest economic data points to a recovery. Consumer spending rose for a sixth straight month in March, household savings fell to a 1.5 year low and the ISM Manufacturing Index touches 60.4 level. In addition, the Singapore government has also revised the 2010 Gross Domestic Product growth to 7-9%, from 4.5-6.5%. Therefore, we view that the global economy should be able to continue their recovery. “Never short a dull market”, in other words, don’t bet on a downturn just because it is been a while since we had one.

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Armed with an arsenal of investment knowledge, Xavier is the Senior Research Editor at Shares Investment.

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