Oversold pressures at hand

The Straits Times Index’s decline was halted near the low it made in June. The closing low was 3,074 and the intra-day low was 3,065. This may provide support and impetus for a temporary bounce. The down momentum is still in force currently, and needs to dissipate before the market can stage a meaningful rebound.

Asset-heavy, debt-laden stocks such as real estate investment trusts (REITs) are out of favour. The FTSE REIT Index made a new 2013 low of 704 on Aug 22, breaking below the closing low of 724 reached in June.

Technically, the breakdown indicates a downside target. The FTSE Real Estate Index, on the other hand, has not made a new low. It closed at 714 on Aug 22, holding above the closing low of 704 in June.

While blue chips tumbled in the past five sessions, led largely by the Jardine group, dealers were trading lower liners. Rotational interest kept penny stocks afloat and they ranked among the top gainers in the past five sessions.

Albedo attracted speculative interest and surged to 4.1 cents. The counter has had a volatile year, and closed at 5.6 cents in March, after which it tumbled to 1.4 cents a month later, in April. The current level looks unsustainable. Elsewhere, Geo Energy Resources rebounded, after a moribund six months. This is the counter in which billionaire and former hedge fund manager Jim Rogers has an interest. But even he could not revive its fortunes this year. On Aug 22, however, the counter managed to rebound sharply.

The Hang Seng Index (21,895) was surprisingly resilient as global markets tumbled. It managed to hold above its 100-day moving average at 21,372. Both quarterly ROC and 21-day RSI are falling, though, and the index is likely to trend lower.

VIX RALLIES AMID MARKET VOLATILITY

The Volatility Index (15.2) continued to rebound, moving above a minor resistance at 14.90. The next resistance appears at 18.20. Quarterly ROC continues to recover, but the shorter-term 21-day RSI is at the high end of its range. Still, the VIX will probably move higher first before it undergoes a correction.

The Dow Jones Industrial Average (14,897) may remain weak through the next two weeks (Aug 26 to Sept 6) as both quarterly ROC and 21-day RSI are retreating. ADX is turning up, and the DIs are negatively placed, all confirming an easier phase. Support appears at 14,600.

The Standard & Poor’s 500 (1,642) is also likely to trade at lower levels over the next fortnight. Both quarterly ROC and 21-day RSI are retreating, and this may pressure the index. Support is next at the 200-day moving average, currently at 1,553.