STI: May find suport at 1,780

The Singapore market continue to be dominated by the bears as the benchmark Straits Times Index (STI) making new lows, levels which we have not seen since July 2004. The impending recession coupled with news of investors losing their hard-earned money in the stock and even bonds markets have caused investors to be extemely bearish.

Despite being heavily oversold and many analysts suggesting that the STI may have found bottom last week, the STI continues to slide further. Last month, in my previous analysis on the STI, I have suggested that the STI is heading towards 2,100 points. The STI was at 2777 points then. The STI did head towards 2,100 and was very volatile in that week, where the trading range in 3 days was close to 300 points.

The STI is now at 1,852.15. The short term 30-day average is at 2,268 points, making the STI 18% below the average, which is considered very oversold. Momentum indicators such as ADX, RSI and Momentum have started to increase, causing a bullish divergence on the chart. This means that the down trend momentum has started to weaken.


Daily STI chart as at 1:00pm (+8:00GMT) on 22 October 2008 using NextVIEW Advisor. Click on chart to view enlarged chart.

The STI may have a little more room downwards before it finds support, which in my opinion based on a few patterns and technical analysis should be at 1,780 points. Immediate resistance is at the previous support level at 2,100 points.

Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.