In our previous posting on the STI, we give two reasons why the STI is not bullish. Over the past 2 weeks since that post, the STI has been moving sideways. Today price moved below the cloud and closed below the cloud as well. This could be the start of a downtrend. Where can the STI drop to?
From the low of 2209 to the high of 2671 on 17 April, the 38% Fibonacci correction comes in at 2495. The 50% is at 2441 while the 62% comes in at 2386. The decline can come down to any of these 3 numbers but should not moves below the 62% at 2386 or the uptrend would be in danger. If it drops below 2486, it is likely to go as low as 2206.
MACD is turning down with a bearish crossover. However, the histogram on the MACD does not look strong. As a result, we are not expecting a strong bearish trend but rather a corrective decline after a 20% rally. We hope the Fibonacci 38% can halt the decline but mostly likely it should go down to the 50% correction point at 2441.
Our short term bearish view will wrong if the index move above 2730.