Dow at record high

Dow rallied strongly last night after investors speculated that the worse could be over for banks and other companies hurt by subprime mortgage losses. Dow added 192pts or 1.4% to a record high of 14,087.55 while S&P500 advanced 20pts or 1.3% to 1,547.04. There is a slight divergence between the broad market and the 30-stock Dow. Also, there is a negative divergence growing (since late last week) in the advance/decline ratio. A risk nevertheless..

STI continued to rally yesterday, reaching new all-time highs. Earlier, I was pretty bearish on the STI. Now that it is now about 2% high than its previous high of 3,688, I think the bull is back again at least for now. The broader market is slowly catching up but still lags behind. Also another negative divergence here. STI should continue on its rally today. Property counters would likely continue to lead. After China allowed more funds to flow out of China and into chinese stocks listed in SGX (S-Shares), stock with 'China' in it would likely see further upside from here. China Petrotech, China Sun Bio-chem, Beauty China, China XLX are some of the few that look good on the charts.

Similarly, for the KLCI I was rather bearish. Now that the index is above the 100-day SMA as well as above its 76% Fibo level, I believe that I could be wrong. I now do not see the KLCI falling back to the 1,141 level. If there is a turnaround in the coming weeks, it would likely be only a pullback (less than 10%) rather than a flat out correction (more than 10%). KLCI still lags the regional markets. Can we catch up? With Dow surging to new highs, there is a good chance that KLCI could follow suit.