Look out for the exit sign

As most traders and investors would have already known, the STI plunged below its support of 3000 points last week. When US market and other major Asia market sneezes, the Singapore market catches a cold.

One can quickly observe that STI mirrors that of HSI. And DJI usually leads the two by 1 trading day. The chart below shows the trading ranges of the various indexes from 9^th June to 16^th June.

Inflationary pressures coupled with rising crude oil prices sparked off massive selloff in the global markets. At the same time, there is a weary sense that Ben Bernanke and Co will have to hike interest rates to fight inflation. King of Shares however feels that interest rates should remain uncut because the US economy is still in a bad shape and any increase will send the wrong signals to investors and the market. Ben alone cannot bring the US of the current slump and he will have to act in tandem with the rest of the financial institutes. These big boys are expecting at least a constant interest rates and have priced the market accordingly hence any rates increment will spark off a massive round of sell-off and possibly be the trigger to bring the market into recession.

With the STI support of 3000 breached, King of Shares strongly feels that the next level of support should be at around 2800. We can see from the chart that STI has fallen out of its Bollinger Band, and in the short term, we see a quick rebound back it but the long term trend is still down. So look out for a quick exit and hold on to cash position until August and September time frame before revaluating the market again.

P.S: King of Shares has previously taken cash position when the STI reached 3400. He is seeking to buy in more sometime soon.

Disclaimer: It is not the intent of the author to advice the readers to purchase any form of investments after reading this article. Any opinions, conclusions or other information expressed here does not constitute any personal advice. Information are given on a general basis and are subjected to change without notice. The author will not be held liable for any losses resulting from any errors, inaccuracies or omitted data or from the use of the published information.