I hope you’re enjoying this holiday season with good company, good meals, etc. As we prepare for the shortened trading week ahead, let’s take a look at the charts…

STI Open: 2,830.92

STI High: 2,885.30

STI Low: 2,827.75

STI Closed: 2,877.62

Price Change: + 24.78

Percentage Change: +0.87%

Last week was nothing short of wild. The STI rallied 47 points from low 2,830 (opening) to close at 2,877.62. Apart from Straits Times Index rallied, FTSE ST Mid Cap Index up +1.17%, FTSE ST Small Cap Index up +1.78%, FTSE ST Catalist up +1.59% .

The market staged its usual Christmas rally just when it looked like it was settling into a downtrend. It also reconfirmed several key principles by which we live or die in the stock market:

• Anything can happen
• Risk management is essential for survival
• Don’t argue with the trend: the market can remain irrational longer than you can remain solvent.

Notice that the rightmost price bars on both weekly and daily charts MACD histogram are ticking up and the benefit of the doubt goes to the bulls.

To translate this into action: stay with the uptrend, but keep an eye on the daily MACD Histogram so as not to get caught unprepared in a downturn.

In summary, the trend is up, but certainly deserves a pause after last week’s explosion. We are facing a holiday-shortened week, when many traders take a break from the market. This is the time to preserve your equity, not be a hero or go out on a limb.

Wishing you a very pleasant New Year celebration,

Divergence Trader

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