Latest thoughts from Ploy! happy reading!

Updating the US Dollar index, after the index fell to the support as given last time, it has rebounded and slightly breached above the key barrier at 81.44 yesterday. Despite today’s volatility and the possibility that it may head down to test support at 80.10-79.80, the US Dollar index may continue heading up toward 82.20-82.40. This breakout above 82.20-82.40 will add pressure on the upside of global equity markets.

The SET, on the other hand, seems to be able to weather through the strengthening US dollar. It has breached above the barrier at 1,043-1,045, and the next barrier is around 1,065-1,070 (revised down from previous chart due to the declining slope). However, the Baht/Dollar exchange rate, despite the current volatility, is poised to test the barrier at 31.90-32. The breakout above 31.90-32 will decrease the possibility that the SET will breach above 1,065-1,070. We have to wait and see which index will reach and test its barrier first.

The SET’s barrier at 1,065-1,070 is a key barrier, as shown in the chart below. The trend line that yields the resistance at 1,070-1,065 is the same line that when the index hit last August, the index fell to 843.69 early last October. The 843.69 point is reached at parallel support line, which again, coincides with the end of the X-day cycle support. The next X-day cycle will end around the 31^st of January. This means that, if the SET tests the barrier at 1,070-1,065 and can’t make a breakout, it may begin to fall and the downside may last until the end of this month. How deep it will fall is still a wait-and-see, but I would like to have a stoploss line at 1,030. The next support after 1,030 is at 1,006-1,000. Like I said last time, falling below 1,000 signals a Double Top pattern and the downside in such a case may be steep.

Another risk that can be seen is shown in the Dow Jones. The index is heading up to test the barrier at 12,600, which is also a key barrier. The Dow Jones has tested the same resistance line for several times, and never made a breakout. Each time, the downside was relatively steep: the first time the index fell from this resistance, the Subprime crisis followed. I think that the situation may not be as severe this time, but it may turn critical if the index falls below 10,400. For now, if the Dow Jones backs down from the barrier at 12,600, the support will be at 11,850-11,750.

Thanks Ploy! you can contact her directly @ ploy@thaicapitalist.com