STI technical comments – near term looking good again

2nd Sept 2007

Since hitting recent low on 17th August, the Singapore Straits Times Index (STI) has rebounded and has been moving sideway between 3228 – 3441 over the past 10 days.

So what are the technical indicators telling us right now?

From the technical indicators that I use, almost all indicators are positive with the exception of multiple moving averages (MMA)…….that is a very good sign I would say, at least for the near term.

Let’s examine some of the indicators separately :

1.Stochastics – I warned of short term correction when it hit oversold few days ago, the STI subsequently corrected for a few days and has recovered with stochastics cutting nicely back up into positive zone on Friday. Stochastics are showing good signs, forming higher lows and remaining above 50 level, all these means that near term trend is likely to remain positive.

2. Parabolic SAR has turned positive since 20th August and remained in positive zone. The STI seems far away from the negative trigger at this moment so risk of turning negative for this indicator in the near term is low. As such, the STI trend likely to remain positive based on this indicator.

3.MACD histogram – strong recovery momentum continues, forming two higher lows and hitting new high. This means that STI recent rebound likely to have more upside in the near term.

4. Bollinger band – narrowing while STI is slowly inching up. When bollinger band narrows, it usually indicates the STI has taken a good rest and about to make a bigger move, either to the upside or downside…..no prize for guessing which side it is likely to move in the near term.

5. MACD – this lagging trending indicator has recovered into positive zone since 23rd August and going higher. This means the STI trend continued to remain positive.

And finally, the last indicator that remains in negative zone is MMA. All short term MMA are still below long term MMA. I have mentioned before that MMA is a lagging indicator and so it will usually be the last to turn positive AFTER most other indicators have turned positive. And MMA is usually used more for medium to longer term signals.

In summary, the odds are in favour of more upside in the near term…..but don’t you just hate it when market gaps up and leave little on the table for traders.