So we averted a fiscal cliff situation in the US for now and kicked the can down the road till March. Market loves the news obviously (but rating agencies don't) and bought the E$ to a high of 1.3299. However, there wasn't enough love to take it above recent high of 1.3307. Worse, it gave back all its gains by the end of the day to close at 1.3186 near its opening of 1.3180 (see chart). This tell tale sign does not bode well for E$ and has to be extra cautious if one had chase the market up yesterday. Looking back at the past 10 trading days, we would also have noticed that E$ had not closed above 1.3250 in any session. All in all, near term bull trend momentum seems to have fizzled off somewhat after buying on rumor and downside pressure is building on the technical chart. Market liquidity should have improved and I reckon it to return to normalcy by tomorrow.
Just to add an observation I made recently.... penny stocks in Singapore are taking off after blue chips have been staying stagnant for awhile and everyone seems to be getting excited. As far as the different phases of a bull cycle is concerned, penny stocks rally normally marks the euphoria phase which in the past happens to be the last leg in any market rally.
For today, intraday o/s condition should limit downside from here though shorter term intraday momentum has turned from consolidation to down. Daily momentum indicator is also starting to show downside bias. Expected range 1.3130/40 (1.3090/3100 expanded) to 1.3230/40. I will play the range but prefer to sell into rally if 1.3130/40 is not seen first.
All the best!
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| E$ Daily chart - Weak close after early rally |
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