Dear readers, the Straits Times Index (STI) went below 3,200 on 29 May 2023. On the internet, some expressed concern on the STI breaking below 3,200. Should you be concerned with STI going below 3,200 and what should you, as an investor expect next? Join me as I share my insights on the aforementioned in this post.
Speaking about the STI heading below the 3,200 level, we must note that the recent trending below the 3,200 level is not something new this year since the STI also went below the 3,200 level in mid March this year, after which the index went up once again. Moving a little upstream, the STI was below 3,200 in mid Sep 22 to mid Nov 22 too.
While some may focus on the 3,200 level, what I am interested in, is the cross-over of moving averages as this may indicate mid to longer term trend.
The 20-day-moving-average (DMA) crossed below the 200-DMA on 23 May 2023; such crossing over in classic investing literature often pointed to a downtrend in the middle term next. The last time the 20-DMA crossed below the 200-DMA was on 22 Mar 2023 and moving up slightly earlier, another such cross-over took place on 23 Sep 2022. What we can note from the aforementioned is that the interval between such cross-over has become more frequent and hence a rebound from the 3,200 seems less and less sustainable.
Furthermore, while some in the investment fraternity highlighted 3,200 STI level, I believe this is due to the fact that the STI has been hovering around this support. What I believe investors should focus on rather is the 3,000 STI level. The 3,000 STI level has often been and is the psychological level of the Singapore stocks markets. A break below the 3,000 STI level in my opinion will lead to a “self-fulfilling” prophecy where investors start selling.