STI closed 2,821.11 on 7th May 2010 and has dropped 7.1% from the 15th April 2010 intra-day peak of 3,037.97 or dropped 6.96% with the closed on 15th April 2010 of 3,032.03. After past 5 sessions on closing with a black candle, STI managed to end 7th May with a white candle. However, the whole situation is still not out of wood since the breaking down of the mini head & shoulder formation. The followings were observed :-
1. An intra-day low of 2,775.20 occurred on 7th May 2010 and that was 8.6% drop from the peak of 3,037.97
2. With DI pair negatively spaced and ADX signal rising above 20, the downtrend is starting to gain strength
3. Sign of long-term GMMA lines start compressing but the 30d line yet to cut down 35d line
4. Stochastic has showed sign of a short-term technical rebound as it has cut up already
Some points need to take note and monitor :-
1. The 200d EMA line at the moment is at 2,734 and at this value it is about 10% drop from the peak of 3,037.97
2. Any short-term technical rebound will meet resistance at the 2,880 level
3. The 2,700 resistance level which STI tried to overcome from the period of Aug 2009 - Nov 2009 should provide quite a firm support for this pull back
4. If the 2,700 support level can't sustain, STI might drop to the next level of firmer support at 2,580 which is also the 15% drop from recent peak of 3,037.97.
5. Need to monitor for long-term GMMA lines in fully compressed mode as that could decide further breakdown or rebound
6. Need to monitor ADX signal rising towards 40 when the DI pair is negatively spaced as this might accelerate the downtrend
Short-term wise STI should be having a technical rebound with resistance at 2,880. If 2,880 is broken, this will negate the downtrend. The support level at 2,700 - 2,734 region should be able to support if this pull back is not a deep one. More serious pull back will see STI hitting the 2,580 level ( 15% pull back from recent peak ). Also note that the value between 2,580 - 2,700 was consolidated between the period Aug - Nov 2009 before STI can overcome the 2,700 resistance in Nov 2009. Therefore, that would be a very good and firm support.
Above is the weekly chart of STI. From the perspective of a longer time frame, it is not as bearish as most deem so. There is an equilibrium line at around the 2,754 level from 2008 till now. Market dropped below this line in the worst part of the global financial crisis, and rebound to this equilibrium level. As global economy has not been fully recovered to the peak in the 2007 period, upside above the 2,754 level should be limited with resistance at around 3,120 and 3,460 level. Also note that around the region between 2,180 and 2,250 there were couple of golden crosses of MA happened and unless those are broken down else major correction is unlikely.
On weekly basis, the long-term GMMA lines still in uptrend while short-term GMMA lines started to compress. Both the RSI and Stochastic are cutting down after toppish for past weeks/months. The DI+ also cutting down the DI-. While the long-term trend might still be up, STI could be facing short-term of downwards bias for few weeks to few months period fluctuating around the equilibrium line of 2,754 level.
Short-term investors/traders with market volatility increasing should reduce exposure and be nibble in the trades, pay attention to the support and resistance levels.
For long-term investors, the 2,700 - 2,734 region and the 2,580 region could be providing opportunity to slowly accumulate
