FSSTI at a terminal stage of wedge formation; For DJIA, 6,900 beckons (UOB KayHian)

In our previous report, we stated that the DJIA was at an advanced stage of a wave 5 decline and that we were expecting the index to head towards 6,900 within seven calendar days. The index had declined to a low of 7,033 on Friday. Price action suggests further downside in the coming days, but we do not expect the index to head significantly below 6,900. In fact, chances are that we could see a key reversal by Monday or Tuesday. A decline towards 6,900 and a subsequent rebound above 7,150 would suggest a terminal low had formed. All in all, we think it is too risky to be bearish or to be short on US indices at current levels.

Singapore’s FSSTI shows a similar set up. Last week, when we stated 1,570 as a support level, we were looking for a rebound off that level and a subsequent decline back to the same in a potential declining wedge formation. After declining to a low of 1,567, the index rebounded to a high of 1,630 and subsequently eased. We highlight the wave formation below and await a decline towards 1,550-1,570. If the index declines to the said range and rebounds above 1,600 or 50% of its decline from 1,630, this could lead to a potential reversal. A move back to 1,900-1,960 could be a likely possibility. Support level for key index stocks are as follows: DBS S$7.60, Sing Tel, S$2.40, ST Engineering, S$2.26, City Developments S$4.56, and SGX S$4.30-4.40.