Singapore Exchange & The Straits Times Index

SGX - Set for a bounce?

Previous posts on the Singapore Exchange (SGX), speculated on my bearishness on the merger as well as the stock price.Since my last post noting a break in the uptrendline for SGX, prices have declined, attempted a back-test, and declined again. A technical bounce is likely for the SGX here, around $7.20. Supporting this view are the declining volumes and the RSI divergence. A sustained break below this level on increasing volumes will negate this play. Upside is limited to the $7.70 pivot initially, or the downtrendline(blue) whichever comes first.

STI - At support, but no reversal signals yet

On the other hand, the Straits Times Index (STI) has not thrown up any reversal signal yet. But price is at a decent support level here at 3040. With weak global cues going in the summer holidays, it remains to be seen if STI can muster enough buyers to move up towards 3120. Further support is as shown on chart.

All the best!

Straits Times Index: Facing a Familiar Foe!

After a rapid recovery from an oversold positive divergence, the STI is now facing a familiar foe: 3120. Also in play is the top of the downtrend channel. Interestingly, the decline in the STI has occured in 3 waves so far. A break above 3120 here, will mean at least a re-test of the highs in the medium-term. On the other hand, a breakdown to reach 2900 will complete 5 waves, and change the outlook decisively.

Straits Times Index: Overhead Resistance

Last post on the STI - Dire Straits - identified a break below 3120, and called for further declines. After reaching a low of 2970, there was a nice rebound. The same 3120 overhead is now serious resistance. Expecting price to correct with support at 3050 zone. A possible inverse head and shoulders reversal pattern is illustrated on the chart. An eventual break above 3120 will make this an A-B-C style correction implying higher prices ahead.

Straits Times Index: In Dire Straits

The Singapore Straits Times Index broke down through range support at 3120 today. Since the break of the long-term uptrendline (blue dotted) - a bearish development - this move down was in the works. Initial support may be provided by the bottom of the parallel channel(pink), followed by good support in the 3040 area.

In case of further bearish developments, an eventual target of 2900 will not surprise.

Hang Seng Index: Breaks Shoulder Line

Last post on the HSI warned of a possible Head & Shoulders pattern. After a false breakdown, HSI broke above the "shoulder" line in the last session on decent volume. This negates the H&S as explained in the previous post (same applies to STI), and sets up short-term bullish possibilities. However, in the very short-term, stiff resistance exists at 23900, and expect a pullback anytime to test the breakout. A break above this level may re-test recent rally highs.

In the medium-term, am looking for HSI to stay in range (no new rally highs), due to a correlation factor with US indices. I will explain this better in the next few posts.

Meanwhile, SSEC is testing downtrendline resistance, after successfully bouncing above 2700. Will be posting an update within the next few days.

NEW YEAR QUESTION: Why did we bounce on the HSI?

While the fundamental folks are busy coming up with "explanations" for the recent bounce (Chinese factory numbers, commodity prices, ben bernanke's haircut, solar flares, etc etc), here's the real reason for the bounce. Have a look at the weekly HSI chart:

Price simply hit the Uptrendline! Watch that line my friends ;)

H&S in H&S UPDATE

Refer to my last post: "H&S in H&S?", suggesting an impending Head & Shoulders short-term top in the Hang Seng (HSI) & Straits Times (STI) Indices. Here are the updated charts.

The HSI has given up on 23600 after a bit of a struggle. Note the volume spike on the last decline. As the hourly is oversold - and we're at the neckline -, a short-term bounce is possible here. A break below the neckline on higher volume, will add strength to the H&S picture with an eventual target around below 21000.

The STI seems to be holding up better, and has not yet reached the neckline. Declining volumes are not high either. However, should this change, we're looking at an eventual target around 2900.

A break above the shoulder line will negate these scenarios. Remember, H&S patterns need not always work out. Weigh the probabilities, and place your stops accordingly.

H&S in H&S?

Head & Shoulders in Hang Seng & Straits Times Indicies?

Last post on the Hang Seng, called for a rebound towards 21600 based on the suggested parallel channel. That's exactly what transpired, and the index did a quick about turn as of Friday's close. The Straits Times Index is executing a similar pattern, which has potential for a short-term Head & Shoulders top. However, note that the RSIs are still relatively oversold on the daily chart, and right shoulders not fully formed in symmetry. An eventual move below the necklines, if it does happen, will offer targets just under 21000 on the HSI & around 2910 on the STI. A break above the shoulder line will negate this picture.

Straits Times Index: Trendline Watch

The STI declined in 5 waves from its all-time high, which means an eventual re-test of the lows cannot be ruled out. Although the medium-term wave-count is unclear to me, here's the chart and trendlines.

Recent breakdowns were on strong volume, which warns of distribution. Any further upside in the near-term will likely be limited to max 3250. Most recent decline broke below an uptrendline(black). Expect near term support at bottom channel line(maroon).

Break below 2670 = Dire Straits!

Crucial level for STI would be 2670, a sustained break below will change the medium-term outlook to bearish. Further support is around 2520/2420.

All the best!

Straits Times Index & SGX Update

Straits Times Index (STI)

Since the last World Markets Update calling for an upwards breakout, STI has moved up almost 5%. The suggested target was 2880 & a reversal. Friday's action saw it close at 2881.

Will it go all the way to the highs of 2950? Nothing is impossible in the world of stock markets, but we can expect some sorta struggle around here. Will it make new highs and keep going upwards? Unlikely, as the fall from 2950 was in 5-waves. Expecting consolidation next week before anymore big moves.

Singapore Exchange (SGX)

The barometer stock! Since my last post SGX short-term: Ready for liftoff! at 7.60, prices have moved up handsomely on relatively higher volume to a high of 7.88.

So what's next? 7.9 area is stiff resistance, so expecting a struggle here. Will we go all the way to the upper trend channel? Watch the consolidation. If it moves sideways and not sharply downwards, a move higher becomes likely. A break below channel line however, makes a move towards 6.8 more likely.

SGX - A Barometer or a Warrant?

Now for the fun part. Those following my posts have observed, that i refer to SGX as a barometer for the financial weather of Singapore. Simply because, activity on Singapore stock market is directly proportional to the growth of the economy. Higher activity is higher revenue for SGX, and vice versa. Also, have a look at the chart below:

SGX tends to act like a leveraged warrant on the STI - at least in the recent past. Based on that observation, might be fun to keep this chart handy. SGX has crossed below STI for now, whatever that means!

Summary

There might be upside left for STI & SGX, but in the very short-term expecting consolidation. I will present an elliott wave review of SGX at a future date, once there's enough evidence.

Good luck, and your views are always welcome!

CAUTION: Refer to the last part of this earlier post, for caveats as to why technical analysis on SGX might not always be reliable.

World Markets Update: S&P500, Shanghai, Hang Seng, Sensex, Straits Times, Euro

Overall Outlook

Medium Term: Bearish
Short Term: Cautiously Bullish

In my humble opinion, for most markets, we've seen the highs for the medium term (except maybe Shanghai):

Believe this week is crucial for short-term direction.

S&P 500

SPX broke above bull flag, and is faltering at the downtrendline. Expecting a downwards consolidation towards 1097(staying above the blue line) on Monday, followed by an upwards breakout & grind towards the 1120 region. Around 1126, i may consider getting seriously short this market. A break below 1097, and this might be something else.

Shanghai Composite

The medium-term triangle scenario working out so far, as outlined in an earlier post. Currently, serious resistance at 3050. A break above will target 3250. A break below 2950 might change the picture. Support at 2700.

Hang Seng

As posted earlier, possible cup & handle, or in the immediate future an inverse Head & Shoulders leading towards 22000. A break above 20700 will confirm. A break below 19800 most likely invalidates. Support at 19400.

Bombay Sensex

Probably the earliest clue as to what may be coming - there was an attempted breakout above 16500 on Fri, but closed below it. If there's follow thru, expecting a rise towards 17400 followed by termination and reversal.

Straits Times

Possible break towards 2880 followed by reversal.

Euro/Usd

Although not a currency expert, expecting a reversal in the Euro, based on RSI divergence (green line)

Summary

Asian markets may offer clues as to what may be coming. Once again, correlations only last as long as they last! Highlighted above are mostly short-term bullish scenarios, if they dont materialise this week, things can get ugly.

We can speculate, but only the market is right. Watch the price action & trendlines - place your stops.

All the best!