Tuesday, June 29, 2010

SSEC broke below the 2500 support

SSEC index dropped 108.22 or 4.27% to 2427.05 as at 3.01 am EDT. This means that SSEC index has just broken below the 'horizontal' support (S2-S2) at 2500. See Chart 1 below.


Chart 1: SSEC index's daily chart as at June 28, 2010 (Source: Stockcharts)

From Chart 2, we can see that today's sharp fall has also violated the Channel line support at 2450. The next support would be from the horizontal lines at 2400 & 2100.


Chart 2: SSEC index's daily chart as at June 28, 2010 (Source: Stockcharts)

The bearish breakdown in SSEC could be in reaction to the result of the G-20 meeting which seems to put more emphasis on fiscal tightening. This has disappointed many economists who think that the global economy recovery is too fragile for any significant withdrawal of economic stimulus. Paul Krugman wrote an interesting opinion piece entitled 'The Third Depression' recently on this topic.

In view of the role of SSEC index as a 'leading' index among equity markets- it was the first to recover in late 2008 & the first to peak in mid-2009- its bearish breakdown could be a warning of further downside for the equity market.
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19 comments:

  1. kyongWednesday, June 30, 2010 12:27:00 AM

    Dear Alex,
    Last night,(Monday Night) Euro and GBP have a bad day, ,resulting in the Severe Sell Down in equity market in Europe/US. (2-3% losses average)
    So tomorrow(Tuesday) may be a very bad day for Bursa Exchange.
    However, i would suggest that the situation may not be too bad as envisaged by many,
    The KlCI may linger between 1250-1280 for 6- 12 months possible.

    May be you should not sell down in a severe falling markets, just hold on awhile to wait for the dust to settle slightly first.

    You may get more Forex news and market conditions from my below blog:
    http://millionaireclub88.blogspot.com/

    Thanks

    ReplyDelete
  2. Alex LuWednesday, June 30, 2010 8:48:00 AM

    Hi Kyong,

    Thanks for sharing.

    ReplyDelete
  3. yumiWednesday, June 30, 2010 10:54:00 PM

    Dear Alex,

    Sunway Reit offer RM0.97 and CapitaMalls Reit offer RM 1.08, which one will have a better potential? Thanks for advise...

    ReplyDelete
  4. UnknownThursday, July 01, 2010 4:42:00 PM

    HI Alex ,

    Can I have comment for dialog ? entry point ?

    ReplyDelete
  5. Alex LuThursday, July 01, 2010 5:10:00 PM

    Hi yumi,

    Both Capital Malls REIT & Sunway REIT have distribution yield of 6.9% for FY2011. Both have well-diversified properties. Some may prefer Sunway REIT because it has a more marketable name. However, they are slightly cheaper REITs in the market now which give yield of 7-8%.

    ReplyDelete
  6. Alex LuThursday, July 01, 2010 5:13:00 PM

    Hi phkoay

    Dialog should have strong support at RM1.00. However, the 50-day SMA line is poised to cross below the 100-day SMA line- giving a mini golden cross. If that were to happen, I believe Dialog would likely to trade sideway for the next few months. In light of this, you may want to buy slowly into this stock instead of taking a large position.

    ReplyDelete
  7. AnonymousThursday, July 01, 2010 7:39:00 PM

    This comment has been removed by a blog administrator.

    ReplyDelete
  8. HengFriday, July 02, 2010 8:30:00 AM

    Hi Alex,

    Any Comment on GenM "PROPOSED ACQUISITION OF GENTING SINGAPORE PLC’S CASINO BUSINESSES IN THE UNITED KINGDOM FOR A TOTAL CASH CONSIDERATION OF £340 MILLION"???

    Thanks

    ReplyDelete
  9. UnknownFriday, July 02, 2010 10:29:00 AM

    Dear Alex,

    Any comments on GenM's fall this morning? At wht level do u think is 'comfortable' to enter for long?

    Also, any thoughts on Gen Sp ?

    Tq.

    ReplyDelete
  10. Alex LuFriday, July 02, 2010 10:41:00 AM

    Hi Heng,

    The GenM's acquisition of Genting UK from Genting SP will not be good for GenM's share price performance in the near future. From the Walker Digital Lottery stake acquisition in 2008 to its recent purchase of Wisma Genting and the current new acquisition of Genting UK, I get the feeling that GenM is unlikely to distribute its huge cash balance to its shareholders any time soon. In fact, one gets the distinct feeling that GenM would probably serve as the banker for the entire Genting group. This gives rise to concern whether these acquisitions are carried out on an arm's length basis as well as whether the cash could be better deplored. Surely, if an asset is not good enough for Company A, why must it be good enough for Company B.

    GenM is in a medium-term downtrend line with resistance at RM2.85-87. GenM has some support from the Channel line at RM2.60-62. On May 27, this support was tested and it held firm. The same support was violated this morning. We will have to wait & see whether the stock can recover at the end of the day. As at 10.40am, GenM was trading at 2.60-2.61.

    ReplyDelete
  11. Alex LuFriday, July 02, 2010 10:45:00 AM

    Hi Seong Wai,

    For the impact on GenM, see my earlier comment. For the impact on Gen SP, the transaction would be viewed in a positive light as it would result in a writeback of STG51 million. Genting UK is carried in Gen SP's book at STG289 million and will now be sold to GenM at STG340 million.

    ReplyDelete
  12. HengFriday, July 02, 2010 11:19:00 AM

    Hi Alex,
    Good day!

    Thank for ur comment.

    After Acquisition of Genting UK, GenM would have a gearing of 0.5 Time.

    I agreed with you that "GenM is unlikely to distribute its huge cash balance to its shareholders any time soon".

    I really disappoint with the Action taken by GenM in Using the Huge Cash.

    The Management of Genting Group is away from what it's doing previously.

    Thank you.

    ReplyDelete
  13. AnonymousFriday, July 02, 2010 12:09:00 PM

    Deax Alex

    Can you comment on PetDag, these stock currently trade cum dividend of 45sen.

    Is it safe bet in current volatile market?

    ReplyDelete
  14. Alex LuFriday, July 02, 2010 5:00:00 PM

    Hi hng,

    PetDag surpassed its strong horizontal resistance at RM9.25-27 on June 18. However, the bullish breakout was not accompanied by significant volume. After hitting a high of RM9.78, the stock has drifted back to this resistance-turned-support. Without volume, I am doubtful that this breakout will lead to a strong rally.

    Note: The proposed 45 sen dividend was announced via the results announcement on May 25.

    ReplyDelete
  15. KENNY BLOGSunday, July 04, 2010 1:28:00 PM

    Good day Alex.
    I have commented GenM in your blog earlier, and I consider to review my earlier comment.
    In my previous comment, I said I sold all my holding of GENM at 2.80 and plan to accumulate at 2.60 level. After the recent acquisition proposed, I think GENM no longer cheap at 2.60 level. And bear in mind that this kind of RPT will occur more often in Genting group in future, I dont think we need to take such a risk to support this kind of company.
    I am deeply dissappointed with
    the management decision.Therefore, after some serious consideration, I have made up my mind to drop this company out of my future buy-in list.Hope u guys will follow also!

    ReplyDelete
  16. LaymanMonday, July 05, 2010 10:37:00 AM

    Dear Alex,

    How r you?

    Wonder if you could assist me in finding out the possible entry price for Maxis? It has floated between 5.2- 5.3 for weeks. Is it worth long term investment in view of the rigid competition amongst the telco companies in malaysia.

    Thanks and good day.

    ReplyDelete
  17. AnonymousMonday, July 05, 2010 12:26:00 PM

    This comment has been removed by a blog administrator.

    ReplyDelete
  18. AnonymousMonday, July 05, 2010 12:26:00 PM

    This comment has been removed by a blog administrator.

    ReplyDelete
  19. Alex LuMonday, July 05, 2010 3:04:00 PM

    Hi Layman

    Maxis is not likely to outperform the market for the next six months. This is because the stock is already trading at its fair value. However, if its data services division put in better performance, it may lead to a re-rating. Until that happened, I think the stock will trade sideway.

    If you still like to get into the stock, the good horizontal support is at RM5.25 & then RM5.10.

    ReplyDelete