US Financial Sector

Dow Jones Industrial Average closed slightly above 8000 points on Friday. The index was down 148 points on Friday after falling 226 points during Thursday’s session. Sellers are definitely in control.

In order for the market to recover, the financial sector needs to stabilize first and banks will need to provide liquidity to push up the market.

A look at the XLF shows that the financial sector in US is still trying to find a bottom. Unlike the Dow, XLF actually went below its Nov 08 lows of $8.54 on 20 Jan 09 before rebounding to a high of $10.51 on 28 Jan 09. It closed at $9.24 on Friday.

The phase chart shows that XLF is still in “Bearish” territory. It tested the 50 day moving average in the beginning of January. But the resistance proved too much for the bulls to overcome and sellers are gaining control again.

The next support level for XLF is at $8.00 level and if this support is broken, it will mean more pain for the bulls.

STI Update

STI index is testing its 50 day moving average again. Based on the Wednesday closing level, phase chart for STI is still in recovery mode with the index above its 50 day moving average of 1759.

However we are now seeing the index at 1711 (10 am Singapore time), which pushes the index back to “Bearish” mode.

With Singapore’s budget day approaching, the bears may close their positions to avoid any surprises next week.

Let’s see if the index is able to push back above its 50 day moving average today. It is finding support at 1711. That is the low set on 24 Dec 08.

Dow Industrial Average

US market closed above 9000 points last Friday. The index is now above its 50 day moving average meaning that the index is now in “Recovery” phase.

The index has stayed in “Recovery” phase for the past 3 trading days. This has been the best performance by the index since the end of Aug 08 where the index managed to stay on “Recovery” phase for 5 trading days before resuming the downtrend.

This time the recovery coincides with the “Capricorn” effect. And hopefully it will turn out to be the real recovery.