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(Updated 25/07/99)

N.B. Above Chart is abstracted from Metastock Program

Last week, we had mentioned that STI was undergoing a bit more complicated and uncertain movement, and indeed it had happened and had probably given a shock to market participants. We said that "if STI break below 2080, it will continue to move down towards 2030 and a possible of testing 1940 before a short term bottom is formed." STI did break below 2080 and free fall towards a low of 1961 last Friday.
We also said that "As for Sesdeq index, last Friday's low of 131 had fallen into the range of 130-135 mark, that represent 50% retracement from the April broke out point to the new high of 206. At the same time, the index had also touch the medium term moving average. Hence, under normal circumstances a short term support or a technical rebound should be in the card." Although Sesdeq did continue to fall towards 126 which created some worries, it did manage to close above 130 on the same day, which proved that our view was right. A big fall on STI last Friday did not bring Sesdeq down to a new low which again confirmed our view that a short term bottom on Sesdeq was now in place.

So what will happen to STI next week? Will it continue to fall towards 1800 like most analysts predict? While we do not rule out a possible test of 1940 before a bottom is formed, we believe STI has either seen the short term bottom or is very near to it. A close above 2030 on the coming Monday or Tuesday will confirm our view that a short term bottom is formed. This is quite possible, considering that the market is now highly oversold and that most participants and analysts are generally very bearish to the market. Another reason to support this view is that, our corporate results season is just around the corner, with DBS to announce its result this coming week and the other banks on the week after next, it will give funds managers an excuse to push up the market. Dow Jones seems to have calm down quite a bit last Friday after the Thursday's hawky speech by Mr Alan Greenspan. It is now holding at its support level and should have a rebound soon if the bull wants to remain in command.
As for Sesdeq, a break above 160 will signal a resume of a bull run towards 183 level. On sectors basis, we remain favor on Electronic and Manufacturing industries.
However, having input so much good news to you, some words of cautious are needed to check your enthusiasm. For Asia region, we are now facing another cross road again, with a possible of completing a bull run that started in August'98. Therefore, watch out carefully now, if Nikkei break below 17,000 or Hang Seng break below 12,500 or Dow Jones break below 10,400 or STI break below 1,800, all these charts points should set up the red alert. By then, investors should get out of the market immediately and remain sideline.

Technically, STI has completed its wave 5 of wave (3) and is now entering into wave (4). The wave (4) is now looking more like a zig-zag a-b-c. If wave c equal to 1.682 of wave a, then the target for wave c should be 1935. As such, we may be very close to a short term bottom now. A break above 2030 on close basis will confirm that a short term bottom is formed.

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.

Support 1940, 1820-1850, 1800, 1700
Resistance 2000, 2030, 2080, 2110, 2214, 2250, 2300, 2500

Events To Watch For The Coming Weeks/Month
  1. The conflict between China and Taiwan
  2. The movement of US stock market and T-bond.
  3. The development of Indonesia election.
  4. Hang Seng and Taiwan Indices movement.
  5. Nikkei movement and the recent Japan financial scandal.
  6. The stability of Regional and Singapore currencies (especially Indonesia Ruppiah)
  7. Regional stock markets movement.
  8. Singapore 3 months Inter-bank rate.