Straits Times Index decline resumes-could head towards 3,000
The market turned volatile during the week of June 27- July 1, proving that the rebound a week earler was temporary.
The Straits Times Index ended the week at 3,095, losing all the gains it made in the week of June 20-24. The index has now moved marginally below the low of 3,098 it made in mid-June.
Based on the chart pattern, in early June, the STI broke below support at 3,160 or thereabouts. This level looks like the break of a neckline, with the chart pattern resembling a double top. The break below the neckline support indicates a downside objective of below 2,900, based on the chart pattern. Any rebound is likely to meet with resistance at 3,160.
The 50- and 100-day moving averages had made a negative cross earlier at around 3,297. On July 1, the 50-day moving average, now at 3,212, has just about crossed below the 200-day moving average at 3,226. Quarterly momentum retreated from its equilbrium line and may take some weeks to reach a low.
Short term traders need to stay out and wait for an opportune time to trade. Short term RSI which had rebounded towards its equilibrium line has resumed its retreat. Quarterly momentum continues its downtrend as well. As a result, the STI is likely to experience several sessions of volatility before the next rebound materialises.
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