STI oversold in short term, weak in long term

SINGAPORE (Feb 28): Important lows provide support and he intermediate low for the Straits Times Index is at 2,972 which happened in October 2018 was. The next important low for the STI is at the 2,623 area which was breached May 2016.

Weekly Chart with annual and two-year momentum

Long term indicators — smoothed annual momentum and smoothed two-year momentum — are falling in tandem. The two-year momentum has been falling since the first quarter of 2018, and annual momentum turned down in January this year.

Quarterly momentum, which resumed its decline in early February after a temporary rebound, continues to fall but is not yet at oversold lows.

Daily chart with short term indicators

Short term stochastics turned down but is neutral so it has room to decline. The 21-day RSI is approaching the low end of its range, but it can fall to the 20s if the downwave is strong. ADX has turned decisively up, and is at a level which indicates a strong trend. Since the DIs are negatively placed, the decline is likely to continue.

Any rebound, in reaction to the oversold RSI, is likely to be tenuous. The broken support at 3,153 is likely to provide resistance, in the event of a rebound. The confluence of the 50- and 100-day moving averages is at 3,220.

At present, volume has expanded on black candle days, and lightened on doji and small white candle days. In the week of Mar 2–6, signs of a rebound to watch out for include will be from the chart pattern, with a close at end-of-day by the index off its low and higher than its open, which occurs on lighter volume. At this point, short-term indicators would most likely lag.