Right timing: Continued correction as market leader loses steam

It has now spent more than a week below its 50-day moving average (3,273) which in turn has started to flatten. Often, this is a precursor to a downturn.

In the meantime, 21-day RSI has formed a minor downtrend, the DIs have turned negative, and quarterly momentum continues to ease. It is now testing its equilibrium line. A break below this level would confirm a continued decline for the STI.

A deeper correction had already been indicated when the STI was unable to hold above a relatively strong support area at 3,265-3,270.

The market could get a temporary reprieve as short term stochastics turns up, but this is unlikely to have much force if quarterly momentum breaks down.

STI Index (weekly)
Raw annual momentum continues to falter and the smoothed indicator has started to flatten.

This could be a sign that the uptrend is somewhat mature and is struggling to maintain its uptrend.

Two year momentum remains in a rising trend, and the 200-day moving average is also intact.

These warning signs suggest that the STI could start to form a top especially if the index is unable to regain 3,273 on a rebound.

DBS Group Holdings ($$20.43): Market leader loses steam
Prices continued to ease after they fell below the 50-day moving average on Aug 11. On Aug 25 quarterly momentum broke below its equilibrium line.

This is the first time it has done so since a break above equilibrium in Nov last year.

In addition, the DIs are now negatively placed and ADX - currently flat - appears poised for an upturn. If this materialises, a negative signal would be confirmed.

The 100-day moving average is at $20.18, and a break below this would confirm a peaking process. Volume has been moderately low, but appears to picking up.

The only saving grace is a possible upturn by stochastics. At best this would provide for a temporary rebound unless prices regain $20.74, a resistance level that coincides with the 50-day moving average.