Phillip Securities Research - Phillip CFD

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Technical Analysis 31 December 2008PriceSTIPrevious close 1770Support level 1 1718Support level 2 1600Support level 3 1473Resistance level 1 1844Resistance level 2 1916STI, Daily, 30 December 200850MASource: Bloomberg, Phillip Securities ResearchSimilarly, the STI has also been in a narrow trading range between 1844 and 1718.From the chart, we can observe that the 50 day moving average also no longerprovides support and resistance and should be disregarded at this point in time.The most immediate numbers for STI support and resistance are 1844 and 1718, thehigh and low of the range. A close above 1844 should quickly take the STI to theintermediate term high of 1916 where resistance should be strong. We will have toreasses the scenario if the STI does trade to that level as we do not have that muchvisibility right now. A close below 1718 will take the STI to 1600 which is minorsupport. The STI will definitely find strong support at 1473, the October low.PriceCRB IndexPrevious close 217Support level 1 208Resistance level 1 231Resistance level 2 246CRB Index, Daily, 30 December 200850MASource: Bloomberg, Phillip Securities Research2
Technical Analysis 31 December 2008The CRB and US Dollar index have shown strong inverse correlations. We statedprevious that the recent depreciation in the US Dollar should begin to give the CRBsome lift. As a result, over December, the downtrend in the CRB has begun to slowdown into a side ways consolidation. Commodities are growth related at this junctureand a rising CRB should help to buoy equities.The CRB has support at the recent low of 208 and a close below it should continuethe downtrend. There is moderate resistance at 231. The key price region to note isthe 240 to 250 level. There are a few important resistance levels here, 240, theapproximate level of the 50 day moving average, 246, a short term high and thepsychological 250 level. The CRB will definitely find resistance in this region and wewill need to watch how it reacts there to determine whether the possibility of anintermediate term uptrend is in the cards.ConclusionEquity markets are undecided on direction and are trading in a narrow range. Weneed to be patient and wait for the market to decide on its direction. In the currentmarket setup, there are 2 sets of support and resistance for the STI, one set from thetrading range and the other from recent highs and lows. The market will have to testand close above or below the recent high (1916) and low (1473) before we can bemore certain of the market direction.Commodities are associated with economic growth now, so a rising CRB would bebullish for equity and a declining CRB bearish. The CRB will act as a magnifier for theSTI when it moves in the same direction and as “brakes” to slow down and advanceor decline when it trades opposite to it. Because of this, It is important to keep an eyeon the CRB.3
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