Staying objective amidst newfound optimism

The headlines spelled doom for Greece 2 weeks ago, but as swiftly as they appeared, they have now been replaced with fresh optimism. In the post last fortnight, i picked up a possible rebound, but was not sure where it would lead to. The STI is approaching multiple resistance around the 3140-3150 region, and that could be the turning point for this leg. The past performances in Nov 2010, January and March have turned out to be peaks, with the exception of April. Using the momentum indicators, that is 3/4 hit rate. The emphasis however, remains on the price action and it should be closely watched.

If the index trades above 3150 on high volume, i will take that as a failed short setup and that confirms a bull run from that point. However, a weak performance, defined as multiple closings below day opening prices/ reversal day bar will point the odds towards a downside slide.

Hence, for trading strategy, it is wise to take profits and standby for a short setup. If the upside break occurs, one should be flexible enough to go long.

That being said, the STI has been consolidating sideways for slightly more than half a year now, yet it remains above 3000. With the ongoing weakness in the Euro and US economies, it is without a doubt that Asia is the region on the hot list. The currencies, often an indicator of relative economic strengths, point towards a strong Sing dollar amidst all the uncertainty. The confidence in the economy will spillover to investments and funds flow. I believe after the correction, a strong bull market will emerge.