Latest thoughts from Ploy!

The SET is now sluggish but upside is still seen. I still maintain my opinion that the SET, and other equity markets may continue the rally until Christmas, as shown in the charts for the past 2 weeks. Unless the SET breaches above the barrier at 1,075-1,078 before/around Christmas, it may become weak and back down. In such case, the worst-case scenario is that the index may head down toward 820-800 next year.

The short-term resistance against the SET is now at 1,043-1,045, and the support is at 1,006-1,000.

The indicators to be closely watched are relatively the same. Keep eyes on the Baht/Dollar Exchange rate which is volatile at the barrier at 31.42-31.44. The strong Baht is a positive sign for the SET, just for now. When the Baht loses its strength, relative to the Dollar, and the exchange rate stays above 31.42-31.44 baht/dollar, the pressure will be added to the Thai market.

The US dollar index is also volatile, which is positive to the SET as well, but the sunny days may not last long, because once the US dollar index can regain its strength, it may head up to test the resistance at 81.30-81.44. A breakout above this resistance means a doomsday for the equity markets, because the strong US dollar weakens the equity markets.

Therefore, keep eyes on the two resistances in the Baht/Dollar exchange rate and the US dollar index, and it is advised that trading should be limited when the two indexes are approaching their resistances.

While the risks from both the US dollar index and the Baht/Dollar exchange rate are seen, the SET may continue a rising zigzag until Christmas or thereabouts. The reason is that, the index is now stronger than other major equity markets, as shown in the charts below. There are still upside gaps before the SET reaches the overbought level, relative to both the Dow Jones, and the Asia Pacific region (excluding Thailand). The SET also outperforms the US dollar index, which is why it doesn’t plunge much when the Dollar index hit 80.73 last week. But, the situation may turn negative, if the US dollar index reaches 81.30-81.40 together with the SET vs US dollar index falling below the X-support, as shown in the charts below.