4 Sept 2008

Why STI Was Falling More than HSI, Shanghai and other Indexes?MAS announced various economy data yesterday; some of which are important such as CPI and PPI figures; but, these figures were ignored in the past and why so different today? DOW closed positive at 0.14% during the night, Nikkei closed down 1%, HSI closed down 0.95% and Shanghai closed flat but look at STI, closed down 3%. All these while, STI has been tracking the movement of DOW, HSI and Shanghai indexes from a distance; for example, when HSI dipped 2%, STI dipped only 1%.

There is no obvious reason except for the possibility that the traders are waiting for some bad news to come because they were cautiously optimistic during the past trading days, cumulating some gains. Today is the right moment; poor economy data plus a Head and Shoulder pattern shown in the attached chart.

Notice that STI broke one of the neckline of the Head and Shoulder pattern on 7 August and the market responded with an increased volume of trade and today, it just repeated the same.

If the STI traders had a choice, they would set a new low target for STI. It is often said that whenever a neck line of a head and shoulder pattern is broken, stock price would further dip from the break point by the same price amount measured from the tip of the head to the neckline. This new low target happened to be 1,600. This target might become a reality if this bear market were allowed to be continued for a number of years.

(Doubleclick for enlarged view)

Disclaimer:
Information here is for sharing and learning. It is not intended to give any advice on price of any stock or movement or trend of any index. If a price or movment of a stock/index is given, it is only intended for illustration. The reader shall verify the information given here before using them.