Dear readers, the Straits Times Index (STI) retreated by 1.70% in yesterday’s session to end the trading day at 2,529.82. I have been sharing with readers over the past few weeks (when the STI was still trading between 2,600 to 2,700) that in no time, the Straits Times Index will soon reach 2,500 as a support. The reason for my prediction is really simple: bearish economical and financial backdrop around the world. Hence, upside potential to any stocks markets are limited while the trend is evidently a bearish and a downward one.
Yesterday’s southing of the Straits Times Index (STI) was accompanied by a large trading volume. Clearly, the Bears have emerged. The STI needs to just dip by more than 1.2% to reach the 2,500 support which I have mentioned.
The 2,500 support is a crucial one. There is every possibility that the Straits Times Index will cross below 2,500 in the next trading sessions. If that is so, this may signal a Straits Times Index crash next especially if the US markets and China markets slide significantly. I have a worst-case target of 2,000 support (or a 20% correction from the current STI level) when that happens. 2,000 level of STI is not impossible given that Singapore is already in a recession.
I know many investors hold the belief that positive development of a Covid-19 vaccine should serve as a catalyst to rally stocks markets around. But the reality from what I see it are that the global economy was already not in a good shape before Covid-19. And also, those businesses who have exited arising from Covid-19 may not come back again.
Further, it may be really some time before the fight against Covid-19 could be fully won. And there is also the oft-cited backdrop that the stocks markets have not crashed for over a decade (and hence the question of whether this crash will happen soon in light of the current market conditions?).
As what I have always advocated, at this stage, investors would be wise to save up liquidity to prepare some savings to tide over the current bearish economy and where possible, build up an investment warchest to invest in stocks when market corrections arise.