STI potential for upsides limited with rising wedge

The index has been bullish for 6 consecutive weeks but has slowed down since last Tuesday. Moving forward, my expectations for a correction is likely to increase however that does not mean that STI will begin its descent immediately. We are in uncertain times, to say the least and the US indexes did close higher on Friday with GSPC hitting all-time highs of over 4000. In the coming weeks, we should be expecting more news on companies adjusting since the job support scheme has officially stopped or has changed from 1 April. Shifting from direct support to loans, some companies might reassess their circumstance with the state of the economy to see if further adjustments have to be made to sustain for the long run. However, we are noticing that there is a generally positive outlook for STI for the time being which remains unchanged for the past weeks.

STI – Updated Daily Chart

On the daily chart, we noticed a clear rising wedge formation which is a bearish signal. However, with the high level of optimism in our Singapore market, it is not impossible to see the extension of our bullish price movements as well. That said, caution might still be exercised especially when it comes to buying at the moment.

STI – Updated Weekly Chart

We have had a good run on the weekly chart and buyers are starting to hold back in expectation of a correction. This thought process is coherent with our mental models as we are keener to buy at a low however it would also be unwise to sell off in expectation of a correction as well as the correction might be milder than previous episodes.

Author’s Call as of 3rd April 2021

• Overall global market euphoria puts investors in a difficult state as upsides shrink for many counters
• STI showed signs of slowing since Tuesday and buying pressure seems to have slowed as well
• Rising wedge formation, also a bearish signal, is clearly marked on the daily chart
• Portfolio reallocation advised if certain counters are severely overbought

Author’s Call as of 27th Mar 2021

• Global markets are bullish at closing on Friday with GSPC closing near 3980
• Some STI constituents are turning bullish as well after consolidating for weeks
• Investors should take profit and shave their portfolios and perhaps free up some cash
• STI remains bullish but it will be foolish to expect this to continue indefinitely