SEPTEMBER has, so far, turned out to be a nervous month for traders, as autumn trading officially commences in the United States and Europe.
The approaching first anniversary of the collapse of Lehman Brothers had cast an unwelcome spotlight on a host of unsavoury practices on Wall Street yet to be resolved.
Last night was particularly worrisome, as US financials plunged. Big gainers from last month like Citigroup plunged 9.2 per cent and Bank of America lost 6.4 per cent.
But just as I had observed in a February posting about certain blue-chips enjoying a natural floor price as the market plunged, there also appears to be hurdles which stock indices will have to surmount before the markets can conquer their Lehman anniversary jitters.
Take the S&P 500 index. It had been dancing around the 1,000 support/resistance level for the past two weeks. This was also around the level which it had initially sunk to, a fortnight after Lehman’s collapse last September.
As for the Hang Seng, it has been oscillating around the 20,000 support level for more than a month now. It is surprising but true that the index was also at this level in the week before Lehman’s collapse.
For the STI, it is obvious that it must breach the 2,600 level in order to regain its upswing momentum, after regaining this level on July 28. Like the Hang Seng, STI’s current level of 2,566 brought it back to levels 12 months ago before Lehman failed.
The 2,600 psychological barrier for the STI is important in another sense. On Jan 3, 2000, the STI hit a then all-time high of 2,608 - a record which was to remain standing for six years until it was finally smashed in October 2006.
Unless the STI could break out of its current gridlock, the 2007 bull-run, which caused it to surge to a record high of 3,831, might turn out to be an anomaly unlikely to be repeated any time soon.