Weakness in STI Up Ahead

STI may stage a rebound towards 2,300pts first before further declines. Next target should be about 2,220pts. Do stay out and not chase this rebound, at least wait till 2,220 before reassessing again.

The STI has formed a rather clear momentum divergence and is also confirmed by almost all the first and second tier stocks. This lack of buying pressure does not seem to be confined to the blue chip STI only.

15 June 09 and 16 June 09 have also shown a rather bearish advance/decline ratio of 1:5 and 1:4 respectively. In other words, a good bulk of the stocks have decline over the past 2 days, telling us there is weakness across the board.

From a technical stand point, the past 2 days have been important as they confirm the momentum divergence in the STI as well as for many individual stocks.

The stocks below are meant to be examples of signs of weakness to look out for as we cannot cover all the stocks available. Investors should be wary of stocks that show momentum divergences or lower highs at this juncture. In general, almost the entire Singapore market is telling us that there is weakness up ahead.

The market is telling us that there seems to be weakness in the immediate future through failure to make new highs, momentum divergences as well as weak market breadth. Our targets for this pullback are 2200 and upon clearing 2200, possibly 2050.

The STI has run up substantially over the past few months and currently is displaying signs of a top. While visibility for how long or how deep the correction will last (if it even unfolds that way) is rather limited.

However, given that the majority of stocks across the board are giving the same message of impending weakness to us, it would be a prudent decision at this point in time to take a good bulk of profit off the table.

Should there be another leg to the upside, there should be ample opportunity to re-enter the market again. We prioritise the preservation of capital and profits and advise investors to stay out/exit long positions for the time being.

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