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Editor’s View: S&P 500 Is Still Within The Uptrend Channel
Perspective | 28 November 2012
By: Xavier Lim
Articles (51) Profile

Asian stocks fell today as the US top lawmakers made little progress in talks on resolving the “fiscal cliff”, ignoring news that the Eurozone finance ministers have agreed to another round of aid to Greece.

The Japan’s Nikkei 225 Index fell off its seven-month high, while the yen rebounded from its weakness against the dollar to trade below ¥82.00 in Asian trading Wednesday. Over the last two weeks, Japanese shares have rallied mainly attributable to a weaker yen as well as speculation that Japan’s main opposition party would win next month’s election and push for greater monetary easing.

Meanwhile, the Shanghai Composite Index continued to plumb new depths after closing below the psychologically-important 2,000 point level for the first time since January 2009, as investors are disappointed on the lack of policy measures introduced to support the economy. Investors are also worried that any structural reforms implemented by the new Chinese leaders may further slowdown the economy.

However, I had pointed out in a finance and investment programme on MediaCorp Radio FM95.8 recently that more data are pointing towards a recovery in China’s economy. Hence, I suggest that investors may wish to consider buying into shares with sound fundamentals and potential beneficiaries that could ride on this recovery.

Looking at the one-year period daily chart for Standard & Poor’s 500 index (S&P 500), it has rebounded from its trend line support of 1,340 and has broken its psychological level of 1,400. The index is moving up gradually in the uptrend channel, suggesting that bullish momentum is still intact. The Straits Times Index is likely to track the US indices and hold onto its 3,000 psychological level. Investors might want to take note that if S&P 500 is unable to hold onto the 1,400 support-turned-resistance level, it could fall out from its uptrend channel.

1-year daily chart for S&P 500

For this week, investors may want to pay attention to the US new home sales that will be releasing today as well as look to the weekly initial jobless claims data and US’ GDP growth in 3Q12, which was forecasted to be 2.8 percent, on Thursday.

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

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