Market Correction Or Trend Reversal?

Dow Jones Industrial Average closed at 9712 on Friday down 249 points. The moved erased all the gains made on Thursday. The index closed below the uptrend channel and is at dangerous territory. The RSI is now at 45 level. Note that RSI has not fall below 40 level since Jul 09. MACD is showing bearish signal as well with the indicator below its signal line. -DI is set to cross the +DI, this may mark the beginning of the correction that the market has been expecting for some time now.

The next few trading days will be crucial. If the index is able to close within the
uptrend channel, it will be good for the bulls. If the index is not able to gather enough
momentum, then the correction looks set to test the low of 9378 set on 2 Oct 09.

SC Global

SC Global has come a long way since hitting a low of $0.295 on Mar 09. Prices tested $1.42 on 5 Oct 09 before rebounding to close at $1.63 on Friday 9 Oct 09.

SC Global is in the luxurious property sector. Sale of Seven Palms Sentosa Cove got underway and it managed to sell 6 out of 10 released units in a recent private preview. Transacted price range from $3,100-$3,400 psf with each unit costing $11m.

The technical charts are also showing improvements following the test of $1.42 on 5 Oct. Prices is on the rise and is set to test $1.77 level. MACD indicator is about to make a bullish crossover. However volume for the recent rebound has been on low volume which shows that market players are still not coming back in full force.

Last Friday, this counter makes a Doji pattern. If the price can break the $1.77 level on high volume, we could see $2.00 soon.

Singapore Market

STI index has stayed within a 200 points range since it broke the 2424 resistance level in mid July 09. The bulls pushed the index to 2700 on 4 Aug 09 but could not overcome the sellers that came in to take profit.

The market correction that analysts talked about has materialized. Investors have been buying on dips and that strategy seems to be working since March 09.

The technical charts are showing warning signs. –DI has just made a crossover with the +DI. MACD histogram has been fluctuating about the zero line which shows a directionless market. However the MACD indicator has recently pulled away from the signal line meaning that selling is gathering pace.

With Dow closing down 42 points on Friday, there will be some selling pressure early next week. Another thing to note is the strength in Japanese yen. USDJPY currency pair traded at a low of 89.50 before recovering slightly to close at 89.84. This will exert some pressure on the Japanese equity market next week as well as strength in yen is bad news for Japanese exporters.

The support level to watch is 2560, 2521 and 2424.