With election over and PAP (ruling party) won 83 out of the 89 seats in an expanded parliament. This result showed that PAP won 69.9% of the votes, a close to 9% increase from 2011 elections.

Statics shown that PAP tends to receive a larger share of votes during recession or economic slowdown.

1. 1997 Jan election, Asian financial crisis, PAP won 65% share of the votes, a increased of 6.6% from 1991 elections.
2. 2001 Nov election (dot.com crash), PAP won 75.3% share of the votes, a increased of more than 10% from 1997 elections.

What investors/business fears the most is uncertainty. Since the election outcome is pretty clear, the market will respond better to PAP wins. As for politics - let me put some thick and strong tape over my mouth before I start spouting political opinions.

So let’s look at our charts……..

STI Open: 2,842.28

STI High: 2,931.65

STI Low: 2,829.20

STI Close: 2,888.03

Price Change: +24.22

Percentage Change: +0.85%

Total Volume: 0.917 Billion

The most important message comes from the pattern of daily charts, marked by 1 & 2. This market does not like to go down – the bears attempts to go below 2.840 level but failed. The market that keeps rejecting the lows tells us it wants to go up. MACD Histogram is above zero reference line.

Since the election outcome is pretty clear, we will see market respond well on ruling party wins(PAP) on the first trading day but the FOMC announcement is scheduled on 17th Sep at 2:00pm EDT(U.S Trading Day). As markets await the Fed decision, we will likely see more of this directionless moves of one day up another day down till 17th Sept.

Continue to watch STI at 3,000 level as resistance with short term support near 2,840.

This market is very volatile, and this will create massive moves up and down. This not characteristics of a bullish environment.

Corrections typically take two to three months to form a base and the correction ends. As the end of the correction nears volatility drops and a new bullish cycle begins.

In the meantime, I fall back on a trusty old market rule – when in doubt, stay out. Just as markets go through uptrends and downtrends, or periods of high and low volatility, so do market analysts go through periods of clarity and confusion.

Nobody stays brilliant forever.

Trade safe and use proper risk control, including stops, if you are in this market.

Best wishes,

Divergence Trader

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