Volume contracted on the two sessions when the SPX closed above 2,630, suggesting that this is more likely to be a bear market rally than a new bull market.
The Straits Times Index is currently challenging the top of a minor base formation at. Last week, Right Timing had identified the resistance/ breakout at 2,561, and the index has managed to move marginally above this breakout level. Given that the SPX has broken out of its resistance, the STI should follow suit.
Short term indicators support this outcome. The 21-day RSI is rising, and still at just 44. Similarly short term stochastics is also rising. In the meantime, ADX is falling, and the DIs are at neutral levels — confirming that this is most probably a rebound rather than a sustained upmove.
Both the SPX and STI indices experienced rising volume during the sell-down, an indication of supply/ sellers. The rebound is taking place on contracting volume, an indication that real demand/buying has not quite materialized.
Annual momentum is declining, suggesting that the low of 2,208 for the STI could still be re-tested this year.
