Our market opened 1.8% lower this morning and closed 0.9% down at 3020.15. The candle however, was a big white candle. Based on these two points, the market seems to be sparingly optimistic to a certain extent.
The very short term outlook however, is relatively bleak. With inflation hitting markets all over the world, sentiments on business for the rest of the year is gloomy. On the other hand, recession fears are not as strong as in March, from the fact that a slowing economy is not a contracting one.
With Fed rates expected to rise, the expectation on the market for return will rise in tandem. This will raise the bar on equities to cause rating downgrades in certain cases. My current outlook on the effects of this will be a slow recovery from the current dip which has yet to find its bottom.
Considering all the above factors, we can expect the next support of the STI to be lowered to about 2950 +/- 50. My reason for this is that with recession fears lifted while inflation fears persist, market value will fall close to March levels but not to March levels or below. Price inflation means that the PV of stocks, as compared to before, should be higher to reflect their old value. That can keep the market afloat at least in the near term.
As long as the hope of a late year rally still remains, there is no reason to fear a collapse. In fact, those who believe in it are likely to buy-and-hold in such a time and fulfill the prophesy.
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