I am getting increasingly uncomfortable with how the market is behaving lately. The STI has been stuck in a 2548 to 2700 trading range since mid Jul 09 and the range looks to be getting tighter. I drew two trend lines on the daily candle chart of the STI; one on the price chart and the other on the MACD chart. While the STI was trending higher from Jun to Aug, the momentum, indicated by the MACD chart, failed to reach a higher peak. This is what chartists call 'bearish divergence'. Going forward from August, we can see that while the STI is holding up in her sideways rangebound trading pattern, the momentum was dropping steadily. To me, this is not a good sign.
I also observe heavy interest in penny stocks as retail investors look to be chasing stocks that suddenly exhibit heavy volume with high percentage gains. This is also another dangerous sign.
For those of you who are not in the market yet, i suggest to wait and see.
For those of you who are short term investors, do try to take profit when possible. If the STI should fall below 2548, i think you should get out.
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