SG stock investors should apply caution

What if the Straits Times Index is printing a stock distribution pattern? That this sideway movement merely bought a year of delayed action to the next leg?

 

So many risk factors; striking resemblance to Y2000

Investors in the Singapore stock market must watch their portfolio like a hawk lest January 2017 turns out the same as 2016 (see here, here and here). This is because there are so many bust factors that could turn the market south in a hurry such as the ‘Italeave’ and ‘Frexit’ movement but few boom stories that could entice bystanders to enter. In addition, latest GDP numbers released today show that the Singapore economy continues to slow, contracting 2.0 percent on a quarter-on-quarter basis. Singapore already has the weakest GDP growth in 7 years.

Technically, the Straits Times Index is printing a side-way consolidation pattern very much like back in year 2000. There are many similarities too in terms of market sentiment: the US Presidential Election is just over (2000 was an election year too), the market is worried about a stock bubble, there is a global slowdown in trade to name a few. Is this some kind of stock market distribution going on?

Straits Times Index monthly chart from April 2009 - present

Straits Times Index monthly chart from April 2009 – present

The resemblance is striking.

Straits Times Index monthly chart from April 2009 - present

Straits Times Index monthly chart from April 2009 – present

 

Singapore Straits Times Index underperforming

Investors might want to take note of these:

  1. 2016 turned out to be a bullish year for major Western stock market indices like the S&P 500, Nasdaq and FTSE. They have printed new 52-week highs despite the outcomes of Brexit and US Election were sold as very market-negative by the mainstream media.
  2. On the other Straits Times Index is still in the red year-to-date. The stock index opened the year’s trading at 2889.23.
  3. It managed to trade in the green only briefly for parts of April and July.
  4. STI is currently 20% off 2015-high.

If this is the best the Straits Times Index can do while other indices are printing new 52-week highs, what will happen to the STI if those indices start correcting?

The following two tabs change content below.
Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.   Soh's Twitter account @sohtionghum was ranked #23 out of The Top 70 Twitter Accounts To Follow In 2015 by MahiFX.   Disclaimer notice: "I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."
Loading Facebook Comments ...

Leave a Reply