Worrying signs on STI

Hey all,

Seems like there is no strong Santa rally this year. Despite hoping as hard as ever for a rally in equities, the STI sunk below 2700. The inverted head and shoulders I identified in earlier posts is looking more and more like a failed pattern, or one with a downward breakout. I am not going to give up on upside yet though. The last week of a calendar year is not usually a “normal trading week”, so anything can happen. I am going to wait till next January before finally giving up on upside in equities.

Anyway, a fear I had in the past couple of weeks was that we may be in a downward parallel channel. Take a look at the chart below to see what I mean. For a while – in the head of the head and shoulders – the STI did dip below the channel, but we went straight back up again. If we continue to stay within the boundaries of the channel, thenĀ  I will keep this pattern on my chart of the STI instead of the inverted head and shoulders. Another thing to note is that the STI is below the 200-day MA, and the 200-week MA (not shown). These are strong bearish signs that should not be ignored. I am still hoping for a recovery out of this whole consolidation, but if need be, I will have to change my view on the general market direction.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

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