STI: What now?

In reply to a question from a visitor to my blog, Anthony, on whether the decline in the STI is the beginnings of another bear market, I said, "We will have to pay attention to the trend. The STI, despite its current weakness, is still trading above the channel support. The uptrend is intact. The market is just going through a much needed correction."

I have drawn the channel resistance and support in brown color here.  We see how the price action yesterday formed a white spinning top with the high of the day resisted by the 100dMA.  Index movement stayed within the confines of the up channel.  We now have to see if the reversal signal is confirmed next week.  MFI is still declining, indicating a weakening buying momentum and the index seems poised to enter oversold territory as a new low is inevitably formed.

If the STI does break down, there is some way to fall and I expect the rising 200dMA to provide some support.  That is at 2,550 thereabouts next week.  I have also identified two support levels in red based on candlesticks support and resistance.  Let us hope we never have to test those levels.  Then again, Mr. Market pays scant attention to our hopes.