Prices likely to form minor bottom soon

(Nov 29): Chart 1: STI with moving averages and momentum

Support is near current levels, at the 3,177 to 3,195 range, at the confluence of the 100- and 200-day moving averages.

Long-term moving averages, in particular the 200-day moving average, represent support and resistance levels. In a trending market the Straits Times Index usually finds the 50-day moving average a good support and resistance line. However, the STI has been range bound for this this, fluctuating between 3,000 and 3,400.

The trend of quarterly momentum is still upwards although raw momentum has turned down temporarily. Volume has dwindled, which is normally a sign of a temporary low.

Chart 2: Short-term indicators
Short-term stochastics continues to fall and it could be two to three sessions before it reaches the low end of its range. The 21-day indicator also continues to fall. ADX is still falling, and the DIs have made a negative cross. Falling ADX implies that the STI is likely to stay range bound.

Since quarterly momentum remains intact, the STI is unlikely to fall much further, support likely to appear at 3,177. In the past month, the index peaked temporarily at 3,285, before retreating and this level is likely to provide resistance when prices rebound.