Latest thoughts from our chartist Ploy! Today she explains her concerns for the SET and what key points to look for.

The SET breached above its previous High at 1,148.28 last week, with Thai investors cheering joyfully and betting for 1,200 or even higher. Such sentiment turns negative this week and I begin receiving calls from clients, asking whether the SET will make a correction of 25-30 points of more.

Well, if you look at the chart below, you will see the SET plotted with the same channel lines as given last week. This week’s so-called correction has been expected and the situation is not yet severe. Support for the SET is now at 1,152-1,149 and you may want to cut back partly if the SET falls below 1,149. As I am writing this article, the SET is rebounding beautifully from this support, and I am keeping my fingers crossed that it can make a successful rebound. This week resistance is at 1,190-1,200.

However, if the SET can’t stay above the support at 1,152-1,149, it may fall to 1,145-1,143. You may want to cut back for another notch (approximately 20-30% of your portfolio depending on your average cost) if the SET falls below 1,143, together with the SET50 falling below 809. Keep in mind that, both conditions must occur in order for us to cut back on our exposure.

The things that I am not very comfortable with are shown below.

The US dollar index has slightly breached above the barrier given last week at 79.20-79.40, shown as a blue line in the chart below. The US dollar may be strengthened and heading up to test 80.12. Like I always say, the strong US dollar is not good for equity markets. This is the global risk that is putting pressure on the SET. 

Also, the Baht/Dollar Exchange rate has breached above the 30.51-30.54 resistance, given last week. The baht may become weaker against the dollar, and the rate may head up to test the resistance at 30.92. Another risk factor for the SET.

Another risk factor is shown in the SET vs the US dollar index. The chart below shows that the SET is close to the overbought level, relative to the US dollar. If the SET can not breach above this resistance, the chance that the SET will continue to out-perform the US dollar is lessened and unlikely.

Thanks ploy! If you have any questions feel free to contact her directly @ ploy@thaicapitalist.com