Singapore: STI Index (.STI) faces the risk of a technical recession

Singapore: STI Index (.STI) faces the risk of a technical recession

Singapore: STI Index (.STI) faces the risk of a technical recession

Investors are sanguine about Singapore’s equity market even as the nation faces the risk of a technical recession, as a positive outlook for dividends and earnings overshadows threats from the U.S.-China trade spat.

Singapore’s trade-reliant economy unexpectedly contracted by 3.4% in the June quarter from previous three months, reflecting sluggish global trade and electronics cycles. Following the data release, the International Monetary Fund on Monday cut Singapore’s 2019 growth forecast to 2% from 2.3%.

The benchmark Straits Times Index, on the other hand, has surged 9.3% this year. The gauge is among the best performers in Southeast Asia and is expected to rise further. The reason behind such optimism is more than half of the 30-member gauge generate 50% or more of their revenues outside the city-state, hence less influenced by the domestic economy, data compiled by Bloomberg show.

“Singapore is one of the few markets in Asia to be trading below its mean historical price-to-earnings ratio yet paying out one of the highest yields,” said Soek Ching Kum, head of Southeast Asia research at Credit Suisse Group AG’s private banking unit.
Positive Profit Outlook

And while earnings estimates fell at the start of the year, they have risen from their lows in February. Looking ahead, corporate profits are expected to grow by 4% for 2019 compared to 21% decline in the previous year, based on data compiled by Bloomberg.

“Focus going forward remains on the outcome of U.S.-China trade negotiations,” said DBS Bank Ltd.’s analyst Kee Yan Yeo. Singapore’s equity gauge may rise to 3,450, implying 2.6% gain from Thursday’s close, as the world’s biggest economies work toward a deal, he said. 

Overall, the bias in prices is: Upwards.

By the way, prices are vulnerable to a correction towards 3,282.53.

The projected upper bound is: 3,416.51.

The projected lower bound is: 3,308.68.

The projected closing price is: 3,362.59.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 32 white candles and 17 black candles for a net of 15 white candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 75.6769. This is not an overbought or oversold reading. The last signal was a sell 8 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 63.35. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 8 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 7. This is not a topping or bottoming area. The last signal was a sell 9 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 7 period(s) ago.

Rex Takasugi – TD Profile

STRAITS TIMES closed down -3.820 at 3,361.050. Volume was 14% below average (neutral) and Bollinger Bands were 49% narrower than normal.

Open High Low Close Volume___
3,349.7303,361.7603,347.1003,361.050 181,650,592

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period     50-period     200-period
Close: 3,351.26 3,256.32 3,194.17
Volatility: 7 11 15
Volume: 194,145,488 208,785,120 212,755,504

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

STRAITS TIMES is currently 5.2% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of .STI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .STI and have had this outlook for the last 22 periods.

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