Uptrend still intact but the correction has not stopped

The pullback from 3000 was in fact a market correction sparked off by the recent stock rallies/episode of retail vs institutional investors. Unsurprisingly, STI, the index that has been lagging behind also took a literal u-turn and headed south for 4 out of 5 days last week. At closing on Friday, the STI closed just above 2900 after bouncing from its 20 days MA. That said, SING futures continued to fall another 3 points or 1% which means the STI still has not reflected the actual low it is at. The question that many investors have is when will this correction end? Well, my best estimate is that it is ending soon (supported by TA) because the recent #Bitcoin tip from Elon Musk did not result in a lasting rally. This suggests that this entire episode might be coming to an end and so is the excitement of short positions in the market. The only way to confirm this is to stay tuned next week for a convincing rebound to be sure.

STI – Updated Daily Chart

On the daily chart, the index seems to have broken past 9 and 20 days moving averages in the same week. In fact, the low end of Friday’s candlestick had its wick touching the 20 days moving average as well before closing above it. In the case of the STI, its seems like investors are taking profit rather than expecting a full on correction as there were several morning rallies due to aggressive “buy-backs” when some of its constituents hit an attractive price on both Tuesday and Thursday morning.

STI – Updated Monthly Chart

The slowing of the index might be attributed by the crossing of the 20 months moving average. As the STI are dominated by financial and real estate stocks, I am not surprised to see it progressing slowly in the coming weeks as mentioned last week. Though, undervalued, our index is still undermined by the lack of heavy weights in the ESG and tech space. Therefore, should we then assume that we can continue to buy back or accumulate during the current market retracement?

Author’s Call as of 30th Jan 2021

• The recent episode between retail and institutional investors sparked off a market correction which affect the STI as well
• The STI correction was inline with the rest of the world in the past week and its futures continue to trend lower after market closed
• Chart wise, the index is trying to break the 3000 support level convincingly before heading to 3100 (50 months moving average)
• Continue planning and set price targets to buy back or accumulate if you have missed entry points previously

Author’s Call as of 23rd Jan 2021

• The STI is is weighted heavily on cyclicals hence it will continue to consolidate before the start of FY 21 in April.
• Minor retracement occurring after hitting 2 resistance lines on the daily chart
• Weekly chart RSI has also reached overbought territory hence the pull back
• It will be prudent to start adjusting your portfolios to prepare for a correction which is likely in the coming weeks or months