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Ernest’s market opinion

By Ernest Lim

Ernest’s market opinion

Dear all,

Our STI has broken a one-month trading range of around 3,288 – 3,348. Where will STI and the other indices go from here?

S&P500 last closed 2,426

Based on Chart 1 below, although 20D exponential moving average (“EMA”) is trending lower, the other EMAs, namely 50D, 100D and 200D EMA are still trending up. RSI closed at 37.2. Since 7 Nov 2016, the lowest RSI was around 35.9 on 10 Apr 2017. Although the directional indicators (“DIs”) are negatively placed, ADX is still at a low 12.2 which is indicative of a trendless market. My personal view is S&P500 should find good supports around 2,404 – 2,419, coupled with the relatively low RSI. A sustained break below 2,404 (albeit very unlikely in the near term) negates S&P500’s (tad) bullish chart.

Near term supports: 2,416 – 2,419 / 2,404 / 2,393 – 2,395

Near term resistances: 2,437 / 2,446 – 2,450 / 2,457

Chart 1: S&P500’s RSI reached the 2nd lowest level since 7 Nov 2016

S&P500’s RSI reached the 2nd lowest level

Source: Chartnexus chart as of 18 Aug 2017

Hang Seng last closed 27,048

Hang Seng’s chart continues to be on an uptrend with no bearish divergences seen on MACD, OBV and RSI. Notwithstanding 20D EMA which seems to be trading sideways, the other EMAs are still rising. ADX closed 34 on last Fri amid positively placed DIs. With reference to Chart 2 below, Hang Seng continues to be on an uptrend. A sustained close below 26,150 negates Hang Seng’s (still relatively) bullish chart outlook.

Near term supports: 26,854 / 26,500 – 26,610 / 26,255

Near term resistances: 27,168 / 27,623 / 27,870

Chart 2: Hang Seng remains on an uptrend

Hang Seng remains on an uptrend

Source:Chartnexus chart as of 18 Aug 2017

STI last closed 3,252

STI seems weaker than S&P500 and Hang Seng on a relative basis. Based on Chart 3 below, 20D EMA is turning down. The break below 3,288 points to an eventual measured technical target of around 3,228. Although 20D EMA is turning down, it is noteworthy that 50D, 100D and 200D EMA are still rising with a good degree of separation. RSI closed at 39.7 on last Fri which was the lowest seen since 10 Nov 2016. My personal view is that STI should find good supports around 3,228 – 3,236 and is unlikely to make a sustained close below 3,228 in the near term.

Near term supports: 3,250 / 3,236 / 3,228 – 3,230

Near term resistances: 3,276 / 3,290 / 3,297

Chart 3: STI’s RSI was the lowest seen since 10 Nov 2016

STI’s RSI was the lowest seen since 10 Nov 2016

Source:Chartnexus chart as of 18 Aug 2017

Conclusion

Based on the above charts, it is likely that S&P500 and STI may have limited near term potential downside, should their supports hold. Personally, I have bought in some more shares in certain companies on weakness for the past two weeks, given their near-term potential catalysts seem to remain intact.

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P.S: Do note that as I am a full time remisier, I can change my equity allocation fast to capitalize on the markets’ movements.

Disclaimer
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Ernest Lim
Ernest Lim

Ernest is an avid investor, trader cum remisier. He is a Chartered Financial Analyst® charterholder, as well as, a Chartered Accountant of Singapore. He has published articles on a wide range of topics on finance and investment on his blog http://ernest15percent.com/, ranging from market / sector outlook, technical analysis and fundamental analysis etc. His writeups and comments have been featured in various online and mainstream media such as Bloomberg, Business Times, Lianhe Zaobao, Sharesinvestment, Nextinsight etc.

He has worked at GIC Special Investment and was with Legacy Capital Group Pte Ltd, a boutique asset management and private equity firm, as an investment manager for high net worth clients, after which he went to work as an investment manager before embracing his lifelong passion as a remisier.