In our previous report, we stated that we were equally biased towards an upside or downside breakout from a triangle formation, but added that a break above 2,300 would bring the index towards 2,600. This is also in line with the view, expressed in our mid-year strategy report, indicating a minimum upside of 2,680. Thus far, the index has reached a high of 2,659.
We see limited near-term upside for the index and expect a pullback over the next two days. At the very least, the index should cover a gap at 2,485. Our expectations of an imminent peak and pullback is not primarily based on the presence of a gap, but wave patterns on highly correlated indices such as Hang Seng Index, Dow Jones Industrial Average (DJIA) and FTSE. The Straits Times Index (FSSTI) chart below shows an extremely overbought price oscillator index and that too from a weekly perspective. The index is also close to a 50% retracement level of 2,680 (the basis behind our initial target).
Similarly, the DJIA is extremely overbought and is close to an important Fibonacci resistance level. Near-term wave analysis suggests that the DJIA has completed a five wave rally from the July low of 8,087. The odds of a 50% retracement of the advance from that level are high.
Sponsored Links
No comments:
Post a Comment