Straits Times Index (10 September 2018)

In the previous article, "Straits Times Index (6 August 2018)", I highlighted that the failure of the upward movement to push above 3,340-3,360 resistance could spell a disaster for the bulls. Furthermore, I disagreed that the support at 3,260-3,280 is going to hold and my 1st target is at 3,170-3,200 while my 2nd target is at 2,800-2,840.

Straits Times Index (STI) closed at 3,134.49 last Friday, on 7 September 2018. This drop was very swift and was well below my 1st target of 3,170-3,200 (3,200 as a whole number). Note the word "swift", I will be mentioning it later.

The importance of 3,200

I can't further emphasise how important this 3,200 level is. Look at the chart below and notice the shaded area.

Picture 1: Chart of STI, highlighting the importance of 3,200 level.


The shaded area depicts 3,170-3,200 support. It managed to prevent price from breaching below it for a total of 12 times. This level tells us whether the bulls are able to advance well or not. However, STI closed decisively below the 3,200 for the first time since May 2017.

A closer look at some STI counters

When I apply a simple and basic MACD indicator, look at the shaded area. both lines are pointing downwards decisively with full of bearishness.

*MACD: Blue line as the MACD line, red line as the signal line. When the blue line crosses above the signal line decisively, further bullishness is expected. Vice-versa for crossing below the signal line.

Venture

Below is the monthly chart of Venture, one component that makes up the STI.

Picture 2: Monthly chart of Venture.

DBS

Below is the monthly chart of DBS, one component that makes up the STI.

Picture 3: Monthly chart of DBS.


UOB

Below is the monthly chart of UOB, one component that makes up the STI.

Picture 4: Monthly chart of UOB.

There is a reason why I choose monthly charts - they are the maps for the longer term trends and they triumphs weekly chart, daily chart without doubt.

What is going to happen next?

You might be panicking now, hoping that the market can open right away for you to get out especially if you are holding to any STI counters. Earlier on, I did mentioned the word "swift". What is it?

Picture 5: A closer look at STI daily chart.

There is an immediate support at 3,120 and price on Friday moved up by 0.42 points despite opening at a downward gap. Never mind about that tiny little gain - a doji was formed after a sharp and decisive breakthrough below 3,170-3,200 level. This shows that the drop was too swift and could trigger a short term rebound back to the 3,170-3,200 level. That would be a "final chance" to get out for the bulls, if you want to.

Thereafter, price shall resume its decline towards the psychological 3,000 level and probably, reaching my 2nd target of 2,800-2,840 level.