Quarterly momentum which had moved above its own moving average in the past four weeks has slipped back to its moving average. This could be part of a base formation by momentum. If momentum moves sideways as the STI weakens, it is likely to form a positive divergence with the index setting the market up for a new bull market. Such a move may take months.
SINGAPORE (May 22): During the week, the Straits Times Index, which closed at 2,499 on May 22, fell below its declining 50-day moving average at 2,532.
According to the general theory of moving averages, such a move is a bearish sign. Hence, the market could be up for further declines despite the sharp fall on May 22. This could be a reaction to fund redemption following the strong selling in the Hang Seng Index. Regional and global markets are related, because of ETFs and funds buying and selling in tandem.
