In my last chart analysis of Singapore's Straits Times (STI) stock index, I showed how it broke below its key technical support levels, which meant that another wave of the bear market is likely to occur in the near future. Singapore's recent stock market breakdown occurred a few days after I published a viral report about credit and asset bubbles that are inflating in the city-state.
In the past few days, global financial markets have rebounded slightly after their sharp sell-off that started in January. Singapore's STI took part in the relief rally as well, bringing the index back up to its former support levels (which are now resistance levels) located between approximately 3,000 and 3,040:
Chart Source: Stockcharts.com
Here is a longer-term chart that shows how the STI broke below its horizontal support level at 3,000 to 3,040, its two year old uptrend line, and its wedge pattern:
The STI's recent relief rally does not yet negate the bearish signal that was given when the index broke below its 3,000 to 3,040 support zone. Price retracements are common when important technical levels are broken, and typically confuse the majority of market participants when they occur. Markets will often break below an important support level, then retrace back to that level before beginning their next leg down.
In order for the Straits Times Index's recent bearish signal to be invalided, the index would need to close firmly above the 3,000 to 3,040 support zone. I would set a conservative upper limit such as 3,060 or 3,070 as the 'line in the sand' to determine whether the bearish signal is negated or not.
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