STI: 2400 is still a real possibility.

It has been a while since I looked at the STI. Looking at it again today did not reveal anything alarming. Well, not alarming as in I did not see anything I did not expect to see.  The picture is still more negative than positive.

The MACD has been closing in on the signal line and is now set to do a bearish crossover. MFI, a measure of demand, has been in decline. RSI has also been in decline which suggests that the attempt to continue the longer term uptrend is sputtering.

Using the high of 15 April and the low of 25 May, if we draw some Fibo lines, it is interesting to see that the move up in the STI in recent sessions has met with resistance at the 38.2% line which is at 2,890.  This same resistance capped gains earlier in May.

If the STI is unable to break resistance at 2,890 this week, we would probably see the formation of a lower high on the weekly chart.  Two more sessions to go.  This has implications where chart patterns are concerned.  We might see the formation of a head and shoulders pattern which would be very bearish.

The rising 200dMA at 2,800 approximates the 61.8% Fibo line. This might give the STI some bounce but the bias is for a move downwards if resistance at 2,890 is not taken out convincingly. 

Breaking the previous low at 2,648 would probably see the STI sinking to the eventual target of 2,400 which, incidentally, is not a number plucked from the air but is provided by the 161.8% Fibo line.

Related post:
STI: Falling through the 200dMA.