The Thailand SET closed on Friday at 1517.74, down 0.77% for the week. The global financial markets, including the Thailand SET, were extremely volatile as it was an option-expiration week in the U.S. An option-expiration week is the third week of each month when U.S. stock options expire after the market close on the Friday, unless that Friday is a holiday.

The crude oil options, traded on the Chicago Mercantile Exchange (CME), expired this month on Wednesday, not on Friday. Hence, the surge in the crude oil prices, over 5% on Wednesday, was due to the roll-over effect from the front month contracts into the back month contracts. In other words, there was no fundamental change in the crude oil market, just “paper” trading of oil.

The hedge funds covered their short positions on Friday for oil and ran up the crude oil prices another 6%, as Monday is a U.S. holiday. Hedge funds usually close some of their long/short positions before a long weekend as they don’t want to be caught by surprise, like on Thursday with the SNB euro and Swiss francs stunt. Investors/speculators who ran up the stocks this week, following crude oil prices, got their faces ripped off as the professionals were selling into the rally. So, be careful. 

The doji last week was not confirmed as a sign of bearish reversal because the market decided to trade sideways after the doji emerged. I am guessing that Thailand’s government pension fund might be backstopping the SET. As reported from Bloomberg, the Thailand Social Security Office, which manages 1.2 trillion baht in pension contributions from Thai workers, started boosting its holdings of Thai shares last month in order to get better returns.

An inverted hammer candlestick has now emerged in the chart pattern. The inverted hammer appears when during the trading day, buyers rally prices fairly high but are unable to sustain the rally. Although an inverted hammer is a warning of a potential trend reversal, don’t act until there is a bullish confirmation, such as a gap up or a long white candlestick with heavy volume. 

One should pay attention to the Thailand 10-Year Government bond yield, which printed on Friday at 2.67%, the lowest since 2008. Diving bond yields and a surge in the baht and gold prices are signs of “Safe-Haven” trades. 

The big decline in the 10-Year U.S. Treasury yield this week, as well as in the energy and financials sectors, suggests that the market is questioning whether the highly anticipated QE announcement by ECB President Mario Draghi will come through at the next ECB policy meeting on January 22.

In the event that a bullish inverted hammer is confirmed, the next head resistances are 1530, 1548 (50-day SMA) and 1557 (100-day SMA). In the bearish case of more selling in the Thailand SET, the technical supports will be at 1478, 1459.22 and 1451, or 38.2% Fibonacci retracement. One should pay attention to the 1459.22 support level, as a breakdown could lead to a bearish, lower-lows chart pattern. 

I personally don’t like the number games put out by the investment bankers. Nonetheless, here is what the Thai experts are thinking. According to the Bangkok Post, the Deputy Chairwoman of the Investment Analyst Association, Poranee Thongyen, cut the Thailand SET trading range this year on Friday to between 1728 and 1390, from the previous consensus between 1767 and 1449, citing poor earnings from the energy sectors. The year end target for the SET index also got trimmed to 1670, from 1698.