DBS View on STI 27 Jan 2006

ST Index (2,388.22) – The Straits Times Index gained 9.38 points with 1,12bn volume traded yesterday. Our fast Stochastic for the index has flipped and turned up indicating a likely change in its direction, therefore, we expect a gradual upward swing till the end of next week. In the meantime, our earlier anticipation of a weaker Index may still eventuate given that it penetrates below its current support level of 2,345, competing its 3rd and final corrective wave down.
However, looking at the current market sentiment, our Index might clear above its recent high of 2,395 and head towards our target of 2,450 over the next 3 weeks. This positive momentum is likely to be driven by a mixed of sectors from Technology, Telecommunication and Consumer. In the short-term, we would advise investors to buy into selective Technology, Telecommunication and Consumer stocks on weakness because there is still upside momentum in these stocks. Our year-end target for the Index stays at 2,560 levels.