SINGAPORE (Aug 16): The Straits Times Index has formed a minor harami with white candlesticks. Haramis are usually not strong temporary bottoms or tops. As such, the market’s downdraft may not completely have ended. However, conventional chart patterns suggest some deceleration in the decline.

First, the STI is testing an important low near 3,110 which was reached at end-May. On Aug 15, the index fell to a low of 3,084 and rebounded to close at 3,125 forming a white candle. On Aug 16, the index closed lower, at 3,115, but formed another white candle. These could break the downward momentum. Volume rose sharply, and this could be a sign of climactic selling.

Short term indicators at low end of range
Short term indicators at low end of range Short term indicators are now at the bottom of their range. Stochastics is at its low, and 21-day RSI at 28 is at its lowest level more a year.

In addition, DI is at the top end of its range. These indicators point to at the very least a temporary bounce which has a high probability of materializing early next week. Since sentiment remains poor, the initial bounce may find resistance at the 200-day moving average at 3,209.