Rebound should continue as short-term indicators strengthen

SINGAPORE (Oct 21): Although the Straits Times Index rose just one point in the Oct 14-18 trading sessions, the index tested the 50-day moving average and attempted to move above it.

Chart 1: STI with moving averages and momentum

Quarterly momentum had rebounded off a one year low, but remains somewhat lackluster. However, momentum could gather steam during the week of Oct 21-25.

Chart 2: Short term indicators

Short term stochastics has turned up from the bottom of its range. The 21-day RSI is starting to move higher. The DIs are neutral with ADX is falling and is currently at 16, a relatively low level. This suggests that volatility is likely to be low, and prices are unlikely to trend strongly.

The rebound above 3,100 is a positive development and the STI’s attempt at moving above the 50-day moving average, currently at 3,128 is a sign of gathering strength. If the index is able to break above this level, it would have the impetus to test 3,147. The 100- and 200-day moving averages are at the 3,207 and 3,221.