STI closed below its 50 day moving average on Friday. The market has been trying to stay on the recovery path but Friday’s bearish move proved to be too strong for the market to resist. The 50 day moving average closed below it’s 50 day moving average for this first time since late Oct when the market made its recovery move.
The stock market is being pressured by fears in
STI closed with a gain of 54 points on Friday. For the week, the index was down 144 points. The carnage started due to a downside of US debt. Traders used it as an excuse to take money off the table. The index went decisively below its 200 day moving average, moving the index into bearish phase.
Looking at the daily chart, the market is still in bearish trend. Although there may be a rebound in the short term, the 50 day and 200 day moving average will serve as resistance level. Usually when market drops with such big volume, it will not be able to move above its 50 day and 200 day moving average during the first test. So expect the market to move down again after the rebound loses its momentum.
Hang Seng Index broke into “Bearish” territory since 21 Jun when the 50 day moving average made a bearish crossover with its 200 day moving average. The index has managed to stage a rebound together with the global stock market. However, traders were not able to push the index above its 50 day moving average and the inverted hammer candlestick pattern seems to warn that selling will resume in the coming weeks.
With the
It has been a roller coaster ride for commodities prices for the past few weeks. Silver had a sharp correction and that was followed by Gold and Oil prices.
The phase chart for oil is now in “Warning” phase. Looking at the phase chart, the price of oil dipped into “Warning” phase back in Nov 2010 and Jan 2011. These dips proved to be a buying opportunity with the bulls buying strength pushing the chart into a new high.
Support appears to be at 2940. The phase chart shows clearly that the uptrend is still intact. Although the index moved into “Distribution” territory in late January 2011, the index managed to recover quickly and made its way back to “Bullish” phase. The phase chart has been in “Bullish” phase since 10 Feb 2011.
The phase chart is telling investors to be careful as the market is now in “Distribution” stage. The STI index is now facing resistance at its 200 day moving average. The rebound seems to be a bear market move with momentum indicators painting a negative picture.
Note that the STI has broken its double top formation and this indicates a potential for the index to drop to the 2900 region.
As the phase indicator is showing that the market is in distribution phase, it will be wise to step aside and wait for the dust to clear before going into the market.
The market regained 2700 level on Friday but in order to negate the bearish view, the index needs to break the down trend channel line which is at 2800 level. A break below 2700 gives a target of 2580 which acts as a support for this market.
The trend for the market is now in “Distribution” stage and it will move to “Bearish” phase if the 50 day moving average moves below its 200 day moving average. All eyes will be on the market next week to see whether the index is able to hold above its support level.
The phase chart is suggesting continuation of the current up trend. The index is now near its 50 day moving average. The 200 day moving average is still rising with a positive slope meaning that the long term trend is still intact. The support level is at 3100 level and resistance is at 3220 level. The index looked to be forming a head and shoulder pattern but the index was above to rebound near its neckline. The index now has to go above 3200 level to break the current trading range of 3100 to 3220. Once this resistance is cleared, the next resistance is at 3300 level. In the mean time, the bulls should have the upper hand. Remember the trend is your friend, and that friend is pointing to further upward momentum. Happy 2011!
