The Straits Times Index ended the week of Sept 13-17 at 3,071, a shade above the 200-day moving average at 3,067. It appears almost inevitable that the STI breaks below its 200-day moving average, given the weak state of its indicators. ADX is rising and the DIs are negatively placed. Quarterly momentum is languishing beneath its equilibrium line. In the meantime, the 50- and 100-day moving averages are have turned down. Unless the index is able to push above 3,100 early in the week of Sept 20-24, the market may be in for a volatile October.
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The move, announced on Sept 17, collectively by the Ministry of Trade and Industry, EDBi, the Monetary Authority of Singapore and Temasek to boost the local equity market is a welcome departure from the Singapore Exchange’s multi-asset strategy with its focus on mainly derivative products be they equity, commodity or foreign exchange. The impact is likely to be longer term rather than immediate. As a result, the move could lift the local market over the next 12 months despite the STI’s short term weakness.
The Hang Seng Index broke below its 200-day moving average in early-July and since then it weakened. Support is at 24,748 initially, a low made on July 27, and then at 24,581, a low made on Aug 20. A break below these levels would indicate a downside of 23,512. Resistance is at the declining 50-day moving average at 26,209. More immediately though, the HSI needs to regain 25,000 as this level may turn out to be a psychological resistance.
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