Last week, we said "While STI may continue moving up in the early part of the week it may succumb to selling pressure later. A break below 2150 will signal a beginning of a deeper correction, which will then bring STI towards 2100 as first target and a possible of 1950 in a few weeks time." We were right in expecting a correction and only two days later then the market reaction. At the same time, we also said that "As for Sesdeq counters and penny stocks, the deeper correction may start as early as Wednesday and will eventually take a correction of 10-20% in the coming weeks." The correction started on Monday afternoon and we were only one and a half day later than the actual event, which is considered good enough. We were expecting a 10-20% correction but the sharp correction took a 30% plunge which was above our prediction. Nevertheless, if you have been followed closely on our weekly commentary, you should have been received our advise two weeks ago, on either staying sideline, or holding a very light position or switching to blue chips position. As such, the mini crash would not hurt you and may even give you an opportunity to buy some shares at bargain level. Hope that you guys did well and were not been hurt by the crash.

So what will happen next week after a three days mini crash and a two days rebound? Will STI and Sesdeq index go lower again? First, we believe STI will probably trade higher in the early part of the week, but may succumb to profit taking by end of the week. Expect STI to trade in the range of 2250-2100 for the next two to three weeks before any possible of breaking a new high later. However, if STI breaks below 2080, it would probably go down to test 2030 and a possible of reaching 1940 before an up-surge occur, thought such scenario is relatively low it should not be ruled out entirely. Second, for Sesdeq the worst is probably over, for if we are still in a bull market, a pull back of 30% is considered more than enough. But that does not mean that the market should immediately resume its bull run. Therefore, a consolidation phase for the coming weeks is expected and that after the consolidation, the up-move will probably not be as impulsive as what we had seen in the past two months.

Technically, STI has completed its wave 5 of wave (3) and is now entering into wave (4). The wave (4) could be either a triangle or a zig-zag a-b-c, we would have to sit tight and watch the development. Only a break above 2230 will signal a resume of an up trend.

A break out after the correction will help us in determine which scenario in our "Long Term Perspective" site is the most likely to happen in the coming months.