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Monday, 20 August 2007

Is this the start of the bear market?

I believe all the investors would want to know if this severe correction is the beginning of the bear market and whether the current rebound is a technical rebound or a resumption of the uptrend. 32 of you participated in this poll. The results is still slightly bullish bias with 37% on the bullish side and 28% on the bearish side. The remaining 34% of you are 'unsure' and feel that it could go either way depending on how the fall out of the US sub-prime market pans out.

Let's take a quick look at the 'health' of the STI by looking at the technical picture. The 50-day moving average is beginning to turn downwards and the 200-day moving average has also been breached. It manage to stage a strong rebound today and in my view, STI will need to regain the 3,500 level and maintain above that level to 'overcome' the bearishness. Stock market is a discount mechanism and trade 6 to 12 months ahead of the cycle so if STI cannot move above the 3,500 level and the 3,000 support level gives way, then this could be the start of the bear market. On the other hand, if STI can move above 3,500, it will likely mean the resumption of the uptrend.

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