SINGAPORE (Aug 18): Here are two charts of interest this week:
Straits Times Index (daily)
The STI Index (3,251) lost a further 28 points during the week following a 47-point loss in the prior week. This caused the STI to fall below its 50-day moving average at 3,272. On Friday, the entire trading range for the index stayed below this moving average.
In addition, the 21-day RSI has fallen below a support area near its equilibrium after a series of negative divergences between it and the index. This breakdown implies a deeper correction by the STI. The 100-day moving average is at 3,234, the next level of support. Quarterly momentum is falling but remains above its equilibrium line. A break below equilibrium would confirm an all round weaker phase ahead.
A further sign of a deeper correction was indicated when the STI fell below a former breakout level that should have provided stronger support at 3,265-3,270.
Short term stochastics is at the bottom of its range but it could hover around this level for a few sessions before it attempts a rebound.
STI Index (weekly)
Raw annual momentum has faltered somewhat although the smoothed indicator remains intact. This could be a sign that the uptrend is somewhat mature and is struggling.
Two year momentum remains in a rising trend, and the 200-day moving average is also intact.
Despite these warning signs, the STI has not formed a discernible top formation. The rebound move needs to be closely watched. If volume contracts, that is a negative sign.
