Straits Times Index (3 December 2018)

In the previous article "Straits Times Index (10 September 2018)", I was very bullish in the short term and bearish in the longer term, where the Straits Times Index (STI) "shall resume its decline towards the psychological 3,000 level and probably, reaching my 2nd target of 2,800-2,840 level".

What happened?

Well unfortunately, it did not hit my 2nd target as a matter of fact. The lowest it went was 2,955.68 on 26 October 2018, before the bulls changed the direction, pushed the STI towards 3,000 and hovered around the 3,000-3,100 area.

Picture 1: STI daily chart depicting the low of 2,955.68 on 26 October 2018 via InvestingNote.

Looking at the bigger picture

Hopping on to the monthly chart of STI, it was testing the lower side of the long-term uptrend, depicted with a thick black line in picture 2. Those three circles are where price began to rebound and the line almost perfectly joint the three of them together.

Picture 2: Monthly chart of STI, via InvestingNote.

What can happen next?

STI ended with a green candle for the month ending November 2018, which is good enough to prove that the downside strength is very likely to have completed and the STI is looking to resume its bullishness towards the previous high, at about 3,600 level or even higher towards the upper trendline, in my opinion.

Conclusion

I am bullish on STI in the long term as I once said that 4,000 is a likely target for the bulls and that the current bears are just testing the lows of it (somewhere in my STI analysis articles). This upcoming long-term rally, if it happens, shall be the final leg for the bulls before the next financial crisis in my opinion.

The rally would have to reach higher than the previous high of 3,641.65 achieved on 2 May 2018 and/or even breach the long-term upper trendline for the bulls to stay consistently strong, failing which, the bears will take the control and you know what is likely to happen by then.

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.

Straits Times Index (6 August 2018)





On 3 August 2018, Straits Times Index (STI) rose from an open of 3,300.59 to a high of 3,311.64 before tumbling down to close at 3,265.73. It was a decrease of 20.59 points. What does the drop tells us about the price action? Simply, there was a price rejection observed above that whole number minor resistance - 3,300 level.

About two weeks ago, I have shared my analysis of STI for 23 July 2018. My view was that the STI is likely to go up and test the resistance at 3,340-3,360 region, as I observed signs of accumulation via the inverted head and shoulders pattern.

Picture 2: STI before 23 July 2018.

True enough, only on 26 July 2018, STI made a high of 3,341.42 - just barely touched the 3,340-3,360 resistance just by 1.42 points before going into a tiny consolidation. And that's it. Neither candlesticks have closed at the 3,340-3,360 area since price broke below the same area on 18 June 2018. Furthermore, only two candlesticks made a touch at the 3,340-3,360 area (19 June and 26 July).

So what's next?

Since STI failed to hit the 3,340-3,360 resistance (let alone staying above), the only way is to go down. Take a look at picture 2.

Picture 2: Chart of Straits Times Index, with support and resistance lines.

While moving up towards the 3,340-3,360 resistance, price made a constant upward momentum - which can be drawn along with a blue upsloping trendline. I talked about the failure to break above that 3,340-3,360 resistance and what happened? Price began moving down and even broke below the blue upsloping trendline on Thursday, 2 August 2018. A secondary confirmation came the next day (3 August 2018), when price continued to close below the trendline, halting further bullish strength and resuming the downtrend. This spells trouble for the bulls.

With that, I do not think that the support at 3,260-3,280 is able to withstand the selling pressure and therefore, my 1st target shall be 3,170-3,200 area (whole number support of 3,200). What's more, if 3,170-3,200 area still doesn't hold, further bearishness can slide in, giving me a target of 2,800-2,840.Yes, you saw that - below the psychological 3,000 and by the way, is a projection of the bearish flag formation (if it happens).

Maybe some might still remember one of my STI analysis where I gave a view that STI can hit 4,000 level, the next psychological level that once hit, opens up to near-unlimited jubilation and exhilaration among investors. My stand remains the same, it is likely for STI will eventually hit 4,000 but for now, it is currently testing the low. Hitting 4,000 might take months, if not years (maybe a year or so).