Market players should expect a consolidation shortly, following the 9.3% gain by the Straits Times Index since the start of the year, and a 98-point week-on-week to close at 3,428 on Feb 11. Any retreat should find support at the 3,294-3,300 level which was the peak reached on Jan 21 this year.
Further out - given that the 50-, 100-and 200-day moving averages are intact- and quarterly and annual momentum are moving in the same direction, the index should be able to make further gains. The break above 3,240 which took place in the second week of Jan remains valid as does the upside indicated from the breakout of 4,000. Note, though that a major correction could materialise ahead of this target, at the 3,841 level.
The Hang Seng Index may gain strength as the STI consolidates. Week-on-week, it rose a modest 333 points. In doing so, it has cleared a resistance level that coincides with the upturn of the 100-day moving average at 24,413. This level is the new support. At the same time, quarterly momentum moved above its several-times tested resistance at its equilibrium line. This should provide the index with the impetus to rally towards an upside target of 26,100.
