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Since the beginning of October, individual investors of the SET have been selling into the rally. According to SET market data, net sells of individuals are topping 10.4 billion baht while foreign investors and proprietary traders have been buying with combined net buys of 9.36 billion baht. During the same period, the SET has been up 3.2%. From the chart, 1,401 represents the overhead supply level at which investors who were trapped in the downtrend market just want to sell at the first opportunity to break even.
Depending upon overhead supply, the SET can be stuck at this level for a while before it can move higher. One should be aware that the U.S. markets and the Shanghai Composite index are ready to break out. Thus, the risk/reward to stay long in the market increases. As the old saying goes, “Don’t fight the tape and the Fed!”.
The IMF came out yesterday and sharply cut their Thailand GDP forecast for 2015, to 2.5% from their April forecast of 3.5%. The IMF also slashed their 2016 growth projection for Thailand from 4% to 3.2%. Separately, the fund’s head of financial stability, José Viñals, warned that the world risks sliding into a fresh financial crisis leading to global recession if governments and policymakers mishandle market stability risks. The markets seemed not to care and shrugged off the IMF warning.
The World Bank cut Thailand’s economic growth forecast for 2015 on Monday to 2.5%, from the April 15 forecast of 3.5% growth. Things could get worse in the next two years as the bank also cut Thailand's GDP for 2016 and 2017 by 2 and 1.6 percentage points to 2.0% and 2.4%, respectively. There is more bad news that Thailand has the lowest GDP growth forecast among Asean countries.
Luckily, not many people trade stocks on either World Bank or IMF data. Technically, the index is still moving in a shallow symmetrical triangle chart pattern but downside risks have subsided. The SET is now trading above the 50-day SMA, which is bullish. The shooting star candlestick has emerged, which is bearish. Let’s worry about it when the chart pattern is confirmed. The index could break out and close above 1,401 if the USD/THB exchange rate stays below the 36.50 baht per dollar level, and the U.S. Federal Reserve stays on the sidelines.
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