Since the previous update, the STI has broken out and proceeded to make new highs hence ruling out the possibility of a bearish double top formation. Meanwhile, the long term GMMAs (Red) have compressed, reversed, expanded fully and is now moving upwards establishing a new uptrend. However the STI is ripe for a pullback as it has run up unabated since the pivot low established during the August market crash. A minor correction is healthy for the index as it provides a breather for it to move up higher. We can see that the short term GMMAs (Blue) have started to compress slightly. This confirms that short term traders have begun taking profits. In order for this young trend to be sustainable, any selldown by short term traders must be absorbed by longer term traders so as to provide support to the trend. We see proof of this by analyzing the degree of separation between the long term GMMAs and short term GMMAs. As long as the short term and long term moving averages remain consistently separated, this new trend would be stable and increases the probability of trend continuation. 
In the last market outlook update, we showed that the STI can be easily managed using the CBL or the ATR2x. This is still true. So far there has not been a close below these two trailing stops. However they will be more severly tested in the coming days during this consolidation period. A close below the ATR2x or CBL is a warning that this new trend may not be sustainable. Stay tune for further developments. 
|
|||
