STI set for negative opening following 0.4% lower close

Downside momentum is expected with the index showing difficulties overcoming the 2800 level.

OCBC Investment Research said:

With most US stocks retreating overnight and the Nikkei having a poor start (down 0.7% now), these are likely to cue the local bourse to a negative opening this morning.

With the STI clearly showing some difficulties overcoming the 2800 psychological level with a 0.4% lower close yesterday, we could potentially see it maintaining its downside momentum today.

For now, we still see the immediate support at around 2735 (minor trough), with the subsequent base lying at the 2700 level (major trough in Jun '12).

Beyond the 2800 psychological resistance, we continue to peg the next obstacle at the 2830 minor peak.

IG Markets Singapore meanwhile noted:

The ‘calm before the storm’ is perhaps how one might describe recent market moves. Alternatively we could be in the eye of the hurricane. Either way it could be easy for one to be lulled in to a false sense of security.

Last night US markets were nervously flat for most of the session, with seemingly a slight positive bias on the day as a whole. Then in the afternoon a sell-off in equities means we finish firmly in the red.

With the major US indices closing between 0.6% and 0.9% lower, the leads for the regional markets today are poor. With a mixed performance around Asian bourses yesterday we are likely to see a similar situation in play today.

The dark debt cloud of uncertainty remains over the eurozone. The step forward made through the recapitalisation of the Spanish banks has lacked detail and any new solace investors sought from it was short lived. Globally, investors now understand the issues in play for this crisis and that the devil is certainly in the detail of any new plan to move forward.

Furthermore, the ominous sight of the second Greek election looms large on the horizon with the possibility of a further stalemate as likely as any other result. This is potentially the worst possible outcome for global markets as further uncertainty will damage what is left of investor confidence. If there is a clear majority for or against the bailout, at the very least we will know where we stand.