The chart pattern looks ominous. The two peaks (when the STI tested 3,440-3,442) in Feb and Apr this year have formed a double top. The neckline was at 3,160-3,165, a level that should have provided support, but gave way. As a result, the downside objective is likely to be below 2,900, indicating that the index may need to fall another 200 points before it starts to build a base.
The 50- and 100-day moving averages had made a negative cross at around 3,297. This is likely to continue to exert downward pressure on prices.
Quarterly momentum retreated from its equilbrium line and may take some weeks to reach a low. Only short term RSI is at the low end of its range. This may trigger a temporary rebound towards the middle of the week of June 20-24.
Short term traders may want to trade the rebound while investors may prefer to wait it out till the Fed has gone a bit further along its rate hike cycle before wading in.
