The US Market

The S&P 500 index managed to defend its foothold to stay above the 1,350 level, as it steadily approaches the 1,400 level — a significant psychological level that could signal a strong move to either direction. Read this article about market behaviour when major indices, such as the Dow Jones Industrials, approaches price levels ending in large round numbers.

Caution is advised for the bulls waiting to jump in, as the MACD indicates a “bearish divergence” — where the indicator is trending flat/downwards, while the index is trending upwards. This could mean that only a handful of heavily-weighted stocks are powering the rally, while the broader market is staying flat or even trending down. A piece of homework that you can do is to analyse the “heat map” of the S&P 500 constituent stocks, which allows you to visualize quickly how individual stocks and sectors are performing relative to each other. The size of the each box in the map  represents the weightage of the stock relative to the broader index. Can you see which companies/sectors are leading the markets here?

The Straits Times Index

The STI is continues its assault on the 3,00 level, again a significant physiological battle between the bears and the bulls.

Similar to the S&P 500, we should be cautioned by the bearish divergence shown on the MACD, which is further confirmed with the downtrending RSI showing a loss of bullish momentum. Savvy bulls would do well to wait on the sidelines until the STI breaks comfortably above the 3.000 level before jumping in.

STI Earnings Reports

The following companies are scheduled to report earnings this wee, with STI constituents highlighted below:

Monday: Armstrong, Best World, China Sunshine, CSE Global, First Resource, Golden Agri, Kingsmen, Li Heng, Q&M Dental, QAF, Sembcorp, Swiber, Xinren

Tuesday: DMX, Ho Bee, Hong Leong, KS Energy, Mewah, Nippecraft, Noble, Singapore Reinsurance, Synear, Treasury China Trust, United Engineer, World Preci, Yangzijiang.

Wednesday: City Dev, EMS Energy, Golden Ocean, Hong Leong Asia, Indofood Agri, Perennial

Thursday: Dairy Farm, HongKong Land, Mandarin Oriental

Friday: Jardine Mattheson, Jardine Strategic

Outlook

A review of the major US indices (DOW, SPX, NASDAQ and RUT) charts are all showing signs of bearish divergence against their respective MACD. Technically, this is very bearish for the market, at least for the short term. According to historical market patterns, the markets were due for a correction last week, but it didn’t really happen. Buyers were supporting the market at every minor dip. We should be careful to let the market correct “sufficiently”. Now, the question lies in what would be a “sufficient” pull back – 1%, 3%, 5% or 10%?

Only time will tell….