The Straits Times Index ended the week of Jan 31-Feb 4 at 3,331, up 85 points week-on-week. The movement of the past two weeks has established 3,240 as a support of sorts. This level - 3,240 - is a breakout level turned support. Indicators are intact. The 50-, 100- and 200-day moving averages have made positive crosses with each other. Directional movement indicators are supportive of an uptrend. ADX is rising and the DIs are positively placed. Quarterly momentum continues to form its own uptrend.
These underpinnings suggest that the STI is likely to move progressively higher, that is, tracing out a series of peaks and troughs with each peak higher than the previous peak. Ideally, each trough should be higher than the previous peak and trough.
The upside of 4,000, indicated from the break above 3,240, remains valid. When prices reach the old high of 3,831, a correction could materialise. Noise from global markets, in particular Nasdaq may cause the STI to wobble now and again. For the time being, support stays at 3,240.
The Hang Seng Index rose 1,023 points to 24,573 in the short week of Jan 31- Feb 4. The index is attempting to move above the 100-day moving average at 24,473. Since the HSI ended at the day’s high on Feb 4, it is likely to clear the 24,473 more decisively in the week of Feb 7-11. Quarterly momentum has risen to a resistance area at its equilibrium line. This is the sixth attempt - in the past six months - at breaking above resistance at the equilibrium line.
On a neutral note, ADX is low and falling, suggesting that this indicator may have to strengthen further before the HSI moves decisively higher. Support should be kept the 50-day moving average at 23,802.
See also: STI tests resistance, may attempt breakout
