SINGAPORE (Sept 14): The Straits Times Index is approaching the confluence of the 50-, 100- and 200-day moving averages at 3,216 to 3,244. As prices rebounded, volume contracted, an indication that buying pressure has faded.
Chart 1: STI with moving averages and momentum
The index has rebounded some 5%, from the low of 3.056 on Aug 28 to 3,211 on Sept 13 with the STI rebounding 155 points. Quarterly momentum is encountering resistance at its equilibrium after rebounding from oversold lows. If quarterly momentum is unable to move significantly above its equilibrium line, then the STI may have seen the bulk of its short to medium term upmove.
Chart 2: Short term indicators
Short term indicators may still have some upward momentum. Short term stochastics has yet to reach the top end of its range, which it may do this coming week.
The 21-day RSI is at neutral levels after rising from the low end of its range. The overbought line is still some way away. ADX is falling and at neutral levels, and the DIs are also neutral. These indicators suggest that the index could move towards the 100-day moving average at 3,244 first before it consolidates.
Support should be raised to 3,100 from 3,081 earlier, with the 3,081 to 3,100 range providing a new floor during retreats.