STI index - not looking good

Global equity market shares followed a large sell off for the past few days. Things are looking gloomy at the moment with the Singapore index losing over 150 points since Monday almost 500 points or 15% off the peak about 7 months ago. Bad news just kept coming one after another, since the selling off of emerging market coupled with tapering of the US fed, and bad growth data from China and US economy. So will the selling continue or will it bounce off into recovery?

From the weekly index chart above, we can see that the price has gone down to test the support level of previous low at around 3025(bold brown horizontal line), giving the possibility of forming a lower low. The price has also dipped slightly below the uptrend line, as shown by the thing brown upward line, re-testing the strength of uptrend line. Any break down with force below both line should indicate the end of current uptrend.

Another thing to note is the formation of lower highs over the past few month, which the chart forms a descending triangle formation with the down sloping blue line. As descending triangle is usually a bearish pattern, things are looking even more gloomy. As for MACD and Stochastic indicators, both points to increasing strength in downside movement. MACD is moving away from its signal line and moving towards a lower low compared to the low in Sep'13. Stochastic is also moving back down after just scrapping the 60-mark.

Positive things from the chart are the possible formation of a mini double bottom (circled in red on the price chart) if the price manages to hold above the 3000 level for this week and/or the formation of the descending triangle is more of a continuation rather than a bearish pattern. (triangle are continuation patterns) BUT most indications are pointing otherwise. Just remember to trade/invest within your means and run before things turn really ugly, watch out for the break!