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).

Straits Times Index (23 July 2018)

Analysis on STI

Without delaying, let us look at the chart of the STI. On 20 July 2018, the STI closed at 3,297.83 points. Before that, it was beaten down from a high of 3,641.65 on 2 May 2018 to a low of 3,176.26 on 6 July 2018. STI managed to find a support at 3,200 level (the lower blue-coloured area) and rebound to break and retest the next support at 3,220 level (the higher blue-coloured area).

Picture 1: STI chart depicting support and resistance levels only, via InvestingNote.

With that, STI has taken off from the 3,200 level after testing and should be looking to head over to the next resistance at the 3,340- 3,360 region (green-coloured area) when the market reopens on 23 July 2018.

Signs of Accumulation

Picture 2: STI chart depicting support and resistance levels and the accumulation points, via InvestingNote.

There were signs of accumulation as three points of accumulation had been observed by me. They are marked in circles and what it seems like is an inverted head and shoulders classical pattern. The pattern was successful as price managed to break out of the blue trendline drawn on the chart.