Asian markets have generally fallen in the week of 23 to 27 July, paring gains made in the previous week (16 to 20 July). Fortunately, losses in the week were reduced after comments from European Central Bank (ECB) President Mario Draghi sparked off a late week rally.

Table 1: STI’s past 2 week price performance vis-à-vis other indices

Source: Bloomberg, Ernest’s compilation

Looking forward to this week (30 July – 3 August), all eyes would be on the Federal Reserve Meeting on Wednesday and ECB Meeting on Thursday. Stocks have typically risen ahead of such meetings. According to a study conducted by the Federal Reserve Bank of New York, US stocks have outperformed over short term government bonds in the period of 24 hours before such bank meetings. (Nevertheless, the same study did not report the performance of the stocks vis-à-vis short term government bonds 24 hours after such bank meetings.)

In addition to the aforementioned two central bank meetings, Bank of England (BOE) also meets on Thursday. Another meeting that would be keenly awaited would be the meeting between ECB President Mario Draghi and Bundesbank President Jens Weidmann. The exact date of that meeting is not disclosed but it is reportedly to be held in the coming days before the ECB meeting on 2 August.

Other economic data include manufacturing PMI from China, Italy, Spain, Europe, UK and US on Wednesday. The US would also be releasing the ADP Non-Farm Employment Change and Non-Farm Employment Change on Wednesday and Friday respectively. Thus, it is indeed an action-packed week where there may be significant volatility! (Please refer to “Summary of Economic Calendar for the Week ahead (SIN time)” below for some of the important economic events to take note.)

Despite several high profile US companies that will report results this week, they are likely to take a back seat by the aforementioned central bank meetings. Examples of companies that will be reporting results this week are AIG, Pfizer, Procter & Gamble, Mastercard and General Motors.

As mentioned in my previous bi-weekly writeup (16 July), I pointed out that STI may challenge the highs recorded in the February to April period (around 3,030 to 3,035) in the coming weeks. It promptly challenged on 19 July with an intraday high of 3,040 before closing at 3,029. Barring any “bullish, game changer” policy announcements from the Fed and ECB this week, STI faces immediate resistance at 3,035 to 3,040 and significant resistance between 3,040 to 3,105 (gap seen on 5 Aug 2011).

As such, it may be better to adopt a nimble trading strategy (at least for a portion of your portfolio) to buy on weakness and sell on strength. OSIM (which I have emailed to my clients before its results) is a case in point where it weakened from $1.23 on 20 July to $1.185 on 26 July. Thereafter it gaps up upon release of its 2Q12 results on 26 July. With the barrage of positive analyst reports after its 2Q12 results, it is likely to open higher on 30 July (perhaps around $1.24). Readers who are interested in OSIM can email me at crclk@yahoo.com.sg to obtain the analyst reports for their own research purpose.

All the best for your investment and trading!

Please note that the above is my personal opinion and may not cater to your specific risk profile. The questions of when to buy/sell and what to buy/sell differ greatly between individuals. Furthermore, it is extremely important to bear in mind that the market outlook is never static. It can suddenly change when there are big events unfolding in the market – some events can happen as quickly as overnight.

STI supports and resistances are:

Current: 2,998

Support 1: 2,966

Support 2: 2,954

Support 3: 2,946

Support 4: 2,935

Support 5: 2,920 – 2,923

Resistance 1: 3,035 – 3,040

Resistance 2: 3,044

Resistance 3: 3,063

Resistance 4: 3,079

Resistance 5: 3,106

*Supports and resistances are not static levels. They may be subject to change daily.

Summary of Economic Calendar for the Week ahead (SIN time)

30 Jul, Mon: (EUR) Spanish Flash GDP / Europe Retail PMI / Italian 10-y Bond Auction;

31 Jul, Tues: (JPY) Manufacturing PMI; (EUR) German Retail Sales / French Consumer Spending / Italian Monthly Unemployment Rate / Europe Unemployment Rate; (USD) Personal Spending & Income / S&P/CS Composite-20 HPI / Chicago PMI / CB Consumer Confidence;

1 Aug, Wed: (CNY) Manufacturing PMI / HSBC Final Manufacturing PMI; (EUR) Spanish & Italian Manufacturing PMI / Europe Final Manufacturing PMI; (GBP) Manufacturing PMI; (USD) ADP Non-Farm Employment Change / ISM Manufacturing PMI / Construction Spending / Crude Oil Inventories / FOMC Statement;

2 Aug, Thurs: (AUD) Trade Balance; (EUR) Spanish Unemployment Change / ECB Meets; (GBP) Construction PMI / BOE Meets; (USD) Unemployment Claims / Factory Orders;

3 Aug, Fri: (CNY) Non-Manufacturing PMI; (EUR) Spanish & Italian Services PMI / Europe Final Services PMI / Europe Retail Sales; (GBP) Services PMI; (USD) Non-Farm Employment Change / ISM Non-Manufacturing PMI;

*All economic data especially China data (if any) are subject to changes without notice. The above list is not exhaustive. I have merely listed the economic data that I feel has more impact to the market.

**The above is part of the weekly newsflash that I send out to my clients weekly on a weekend.

Information sources: Various sources such as Bloomberg, Dow Jones, forex calendar, Reuters, SGX, Yahoo Finance, and Business Times etc.


The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or invest in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.

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