The Market Crash.....

During the last few days, we witness a major crash in Singapore market. Why do I consider this a major crash? to start with, it is rare for STI to move 90+ points downward in one day. The last time we experience this move was event 911.

So what might be the cause of such crash? I have seen may comments that it is due to the interest rate hike in USA, the rise of the USD. However, as a technical chartist, I do not believe in such explanation. The market just correct itself to go further, no explanation, no excuse.

During the mid of April 2006, while analysing the STI, I realised from its movement that it has created an up-ward wedge with aim to retrace to aro 2450. It was an exciting time since Singapore was in the midst of an election campaigning. To my surprise, the index shot up breaking the pattern and caused me to have second thoughts of my technical anlaysis capability.

While STI continued to climb upwards into the 2,600 region, I can't help but to notice that all indicators were pointing downwards at that point of time, I thought there would be a correction coming.

It actually came on the day after the election. STI actually shot upward and the government claimed that foreign investors have confidence in Singapore due to its stability. Unfortunately it has never been the cause of foreign investment but of the works of local investors. STI always shoot up on the day after the election, people just anticipate that it would do so.

STI performance on that faithful day actually created a shooting star candle stick. This is an indication of an reversal. True enough the index has been heading south all the while after that. The fall these few days has dropped STI from a level of 2,666 to 2,478, a whooping 188 points in a week.

So where will STI be heading next? The island formation due to the 2 gaps on 19th April and 15th May 2006 indicates a reversal in place. I have learnt from a more experienced chartist that a strong move will not be a one day event, we would see continuation on the next day. My prediction so far is a continuation to the level of 2,444 ( with support level @ 2,440 ) before retracing towards 2,555 and then revisiting 2,444. This is a calculation base on wave theory. The A wave is still in progress, it needs to complete its journey before changing course. from another aspect of the technical analysis, if base on the theory goes, it will retrace to the previous resistance level, from what I see is the level of 2,400.