- In a single session, the STI has broken through our support zone, shedding

over 96.45 points yesterday. The last 5 trading sessions have resulted in

the STI breaching the 50 and 100-day moving averages, which translate

to a high probability of more downside ahead.

- Given the oversold signals shown by the near-term price indicators, we

can expect a lot of volatility over the next 5-10 trading days as the STI will

attempt to stage a technical rebound before it resumes its down-trend.

- Elliot wave counts indicate that the benchmark is currently undergoing a

corrective wave (Wave 4) within a 5-wave up-cycle, which began in June

06.

- Quantitative analysis has revealed a behavioral trend in the index during

its correctional phases, which supports our forecast of a further downside

for the STI in the weeks ahead.

- Using the degree of losses sustained by the STI during every significant

correction from 1981 to date, we noticed a pattern that occurred in 13 out

of 15 such corrections (86% historical occurrence). We broke our

measurements into 2 parts, the 1st part that was the 1st phase of the

correction which was followed by a mild rebound and the 2nd part that

measured the completed correction.

- Every correction that suffered a loss ranging around 9-11% within the 1st

phase of the sell down, the index would resume its plunge after a muted

attempt to recover. The final phase of the correction would result in a loss

of over 18% from its peak. However, where the index chalked up a loss of

less than 9-11% within its 1st phase, the STI recovered strongly and

continued its rally. This occurred in Jan 04 and Aug 05. The only 3

exceptions out of the 13 occurrences were in Aug 88, July 99 and May

06, where the index suffered a pullback of just 15%, despite crossing the

9-11% mark in the 1st phase of the sell down (refer to table 1).

- As of yesterday's closing, the STI has lost approximately 10% from its

peak at 3,316.22. Hence a conservative measurement forecasting a 15%