The Straits Times Index stayed within a narrow range during the week, ending at at 2,509, down 30 points. The move is small in relation to the market’s absolute level, and on Sept 4, the STI formed a white candle on marginally higher volume, suggesting that the index ended on an optimistic note. However, medium term indicators have weakened.
After some weeks of indecision, quarterly momentum has fallen below its equilibrium line, breaking both its own moving average and support at its equilibrium line. Following the downwards drift in the index during the week, the moving averages have turned negative. The 100-day moving average — currently at 2,592 — has started declining albeit mildly, as has the 50-day moving average, now at 2,585. In doing so, they formed a negative cross.
The retreat is unlikely to gather much steam as ADX is falling. This, coupled with negatively placed DIs indicates a mild decline.
Support at 2,484 — the Aug 3 low — is likely to be tested this week (Sept 7–11). Sept 7 is a holiday in the US, and that could stabilise the market.
Elsewhere, Frasers Centrepoint Trust ($2.64) is likely to gain strength against the STI and the broad market following the announcement of a transformational acquisition, and strengthening technical indicators. Resistance/ breakout is at hand, at $2.64, and a successful breakout could see the stock moving towards $3. Support has been established at $2.31.