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yahgot Phillip Securities Research
MICA (P) 144/01/2009

Singapore • Technical Analysis

Technical Analysis –
STI To Trade To 1570
Thursday, 19 February 2009
The STI has breached its short-term low of 1677. In addition, the CRB index has also
closed below 208, which is a very significant support level. The decline in the CRB
has a very high probability of taking the STI down further with it. There is weak
support at 1570 to 1600. After testing those levels, the STI should begin to trade
towards 1473, the October 2008 low, on condition that the CRB continues its
downtrend as well.

Price S&P 500, Daily, 18 February 2009

S&P 500
Previous close 789
50MA
Support level 1 741
Resistance level 1 800 to 804
Resistance level 2 857

Source: Bloomberg, Phillip Securities Research

Phua Ming-weii Last week’s trading has unfolded in line with our forecast, a consolidation and a
Investment Analyst decline on bearish sentiment. We have also emphasized that 804 is an important
 +65-6531 1735
FAX +65-6536 4435
technical level as it marks a short-term low.
phuamw@phillip.com.sg
Web www.phillipresearch.com On the chart, we can observe a long tailed hammer two trading days ago. This tells
us that there was strong buying around 804 (slightly above) that pushed the market
up. However, the recent close at 789, below 804, tell us that the initial buying around
the 804 level has been soaked up by additional selling. Selling dominating the short-
term, in addition to an already present bearish bias, should take the S&P 500 lower.
 Technical Analysis 19 February 2009

STI, Daily, 18 February 2009

Price
STI 50MA
Previous close 1651
Support level 1 1570 to
1600
Support level 2 1473
Resistance level 1 1677
Resistance level 2 1750 to
1780

Source: Bloomberg, Phillip Securities Research

We have mentioned that 1677 is an important short-term low several times.

Yesterday, the STI breached the 1677 level. Having closed below 1677, the next
level of support (price target) is the 1570 to 1600 range. There has not been much
trading activity around those levels, with exception for a short term low at 1570 and
1600 a psychological round number. Support here is expected to be weak.

After testing and consolidating around 1570 to 1600, the STI should continue to trend
downward to 1473.

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 Technical Analysis 19 February 2009

Price CRB Index, Daily, 18 February 2009

CRB Index
Previous close 203 50MA
Support level 1 185
Resistance level 1 208
Resistance level 2 215

Source: Bloomberg, Phillip Securities Research

At this point we want to reiterate again, that the equity markets are trading in tandem
with the commodity complex (CRB), even on a day-to-day basis. Equity markets
declined as the CRB fell sharply, closing at 203 below its 208 low.

We have mentioned that 208 on the CRB is a very important level and a close below
208 should precipitate another down leg in the equity markets. We continue to
maintain this view.

However, draw your attention to the stochastics oscillator at the bottom of the chart.
Stochastics have been in oversold territory for sometime and is beginning to flatten
out. Although stochastics can remain oversold for protracted periods of time, an
oversold reading is a warning that a reversal might be in the cards.

In addition, from the chart above, the drop off in the CRB is rather sharp and a small
up move in the coming week is actually healthy for the CRB as it “digests” the decline.

Nonetheless, the close below 208 is very significant and we expect the downtrend in
the CRB to continue from here on. The CRB will have to maintain a close above 215
for at least two to three days for the close below 208 to be invalidated.

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Technical Analysis 19 February 2009

Conclusion
The market has reacted according to our recent forecasts. With the CRB closing
below 208, we should begin to see a gradual decline in the CRB, taking the equity
markets as a whole along with it.

The STI has already broken its 1677 short-term low and this should begin to take it
down to the next support around the 1600 to 1570 region where there should be
some support. After 1570, there is no more support until the October 2008 low of
1473.

As it is, the long-term trend still maintains a bearish bias. We continue to maintain our
view that if the STI and S&P 500 both close below their 2008 lows, we will see
another leg down in the bear market. The CRB closing below 208 is the first hint to us
that the market might resume another leg down. Watch 1570 to 1600, and then 1473
closely.

The “wrong” point for this analysis would be if the CRB rallies sharply to close above
215 by Friday’s closing. Apart from that, we will need to watch how the markets
unfold and make our judgement from there.

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