SINGAPORE (Sept 27): The decline, following a test by the Straits Times Index of the confluence of the 50-, 100- and 200-day moving averages at 3,216 to 3,244 range, is likely to continue. Quarterly momentum is likely to continue declining and has yet to reach the low end of its range.
Chart 1: STI with moving averages and momentum
The 100- and 200-day moving averages have just formed a negative cross, and this may continue exerting downward pressure on the STI. The only positive signal is the contraction of volume as prices fall, suggesting that selling pressure has abated. Still, at present, there is no sign of demand buying.
Chart 2: Short term indicators
Short term indicators continue to fall. The 21-day RSI is drifting lower, and short term stochastics is set to fall further from its current position in the middle of its range. Stochastics needs to get to the low end of its range for it to signal an oversold position.
ADX is falling, and DIs are negatively placed, suggesting that prices are likely to drift lower.
While indicators point to the market continuing to ease, the move is unlikely to give way to strong selling pressure. During this stage, there could be some pockets of interest that are likely to outperform the STI.
Support appears initially 3,100; the low of 3,056 on Aug 28 is the main support. Resistance stays at the 3,216 to 3,244 range.
