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The SET took a cue from the U.S. equity market rally on Wednesday and ran up 2.87%, to close at 1,358.03, on Thursday with trading volume that was not heavy. Thai individual and foreign investors were selling into the rally as some investors may not have enough confidence that the rally is sustainable. The Thai individual investors’ net sells were about 4.3 billion baht while the foreign investors’ net sells were about 1.7 billion baht on Thursday. The year-to-date foreign investors’ net sells now top 85.6 billion baht, up 244% from the same period last year.
The U.S. equity markets took off with a 3% plus gain on Wednesday after Federal Reserve Bank of New York President William C. Dudley said, “From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago,”. Dudley is the second Fed official to break the silence on a rate hike since the global market crash began. According to recent data complied by Bloomberg, futures traders are betting the Fed will push back a rate hike and the odds of an increase in September have fallen to 26%, down from 40% when the survey was done at the end of July.
The SET might also have gotten some support from the 5.4% rally on the Shanghai Stock Exchange Composite (SSEC) index on Thursday, which closed at 3,085.42. Despite the big run up, the SSEC still closed below the key technical resistance at 3,137. The fear is that China's stock market rally might fade as the People's Bank of China (PBoC)’s 25 basis point cut of the benchmark rates and the reduction of the reserve requirement ratio (RRR) by 50 basis points on Wednesday didn’t stem panic selling from China's neophyte individual investors. The Shanghai Composite index fell 1.27% on Wednesday after the PBoC announcement.
Technically, the SET might have hit a tradable bottom at 1,292.14 on Tuesday, as the index closed at 1,323.88, above the key technical resistance at the 1,296 level, or a 20% bear market territory correction. In a downtrend, all three major moving averages, 50-, 100- and 200-day SMA, are major head resistances, so one should pay close attention to political or financial events when prices approach these moving averages.
Trading in this environment will be volatile near the moving averages and support and resistance levels. The Relative Strength Index (RSI) and the Moving Average Convergence/Divergence oscillator (MACD) are 39.52 and –32.615, respectively, meaning the SET is no longer oversold. |
