FTSE STI closed 3,080.98 on 20th Sep 2010, slowing inching towards the target of 3,120. As the market inching towards that level, there were some worth noting points that investors need to feel concern about.
1. Index moving up was only responsible for a few selective component stocks like Jardine C&C, JMH, JSH and Genting SP whereas the banks, telco, property and offshore/marine stocks were mostly trading side way
2. There seem to be sign of RSI and Stochastic divergence occurring; index doing a higher high but RSI and Stochastic indicators were capped and did not follow a higher high trend.
3. Daily volume also in a declining trend as the index moved up.
The above signs should not be ignored even though on a long-term basis, the trend is up. Technically speaking, once the confirmation of divergence occurred, STI should pull back to a possible support level around 2,915 - 2,955 and that amount to a roughly 5% drop from recent high.
Investors should start to exercise cautious and keep a look out for confirmation of divergence. In maintaining cautious strategy, investors should maintain tight cut-loss measures as a risk management, be quick in taking profit and probably switching to more defensive stocks rather than those higher beta type.
For investors that have missed the recent run up could wait for the pull back to around 2,915 - 2,955 region and start accumulating.
In a longer term, STI could hit 3,460, the "official" bull market level.
