What is the STI doing?

Continue on from my last entry on STI, the plunge for the week is spectacular. The fall of the index was barely supported by the weekly 21 days moving average at 2,495. The drop is very significant, but what does it mean? Are we seeing a correction or a trend reversal?

From the figure above that display the recent daily moves of the STI, we can see that the gaps created an island reversal as named in technical analysis. It marks the beginning of a new wave. Even though from the moves of the last 2 days which tells us that STI is trying to reverse itself, the indicators seem to continue to point south. If this is true the support levels for STI would be 2,450, 2,399. The values is similar with my previous estimation.

While saying that I am still a little doubtful of whether this is a major reversal.

The chart is STI dating from 1998 when Singapore was in recession. Based on the wave count, I am estimating that we are into the minor waves of a third wave. The moves are clear with the counting from 1 of 3rd of 3rd waves to the 4th of 3rd of 3rd wave. Does the the market crash signifies the begining of the 4th of 3rd wave? While I want to believe so, I worries about another aspect of technical analysis, that is the Fibonacci numbers. If the calculation is right, STI won't due for 4th of 3rd wave till the level of 2,938. Terminating the 5th of 3rd of 3rd wave at this point of time seems a little premature. It is a higher possibility that this is only the 4th or 5th of 3rd wave, with its target at 2484 to 2,428.

So is it a major reversal? Answer most likely to be no. Are we seeing the last of the fall this round? I am feeling that it still have some way to go. I do not know what others feel, one thing for sure, my readings on many stocks are still red with very few signs of green. It would be better to be on the side line for a while. Only when STI hits 2,530 then I would likely consider the bear is gone.