Straits Times Index
Prognosis – The rally continues
- The Straits Times Index (STI) has breached its May high of 2,666.33 on
13th October 06, setting a new high of 2,683.24 before closing slightly
lower at 2,666.68.
- Elliot wave counts indicate the bullish up-trend has resumed with the
break above the May high at 2,666.33, thus the corrective wave (Wave 4)
has been neutralized. This puts the STI currently in the midst of Wave 5.
- The candlestick formation on 13th October indicate there could be some
near-term weakness in the index. We note that the cumulative traded
volume for the previous week when the index broke the recent high was
729 million shares in comparison to the week when the index peaked out
in May was 811 million shares, and this is approximately 10% lower.
- Price indicators have been hovering within the overbought regions for some
time now, thus we think it would be prudent that investors exercise some
caution from here on.
- We will not witness another major correction as we had in May, however,
we may face a minor correction that could cause the index to slide towards
our immediate support around 2,500 – 2,600.
- Using a Fibonacci projection of 132.8%, we have set a resistance level of
2,814.71 for the STI.
- The index was pushed higher recently by due to strong performance in
the finance and the property sectors. The manufacturing, telco and china
plays have been lagging in performance. Thus we should expect to witness
these lagging sectors catch up in the weeks ahead. We have also
witnessed a large percentage of water treatment stocks perform poorly in
comparison to the benchmark. Hence, we can expect to witness a
turnaround in this sub-sector as well.
