(Bloomberg) -- Singapore’s Straits Times Index will continue to rally after closing yesterday at its highest in almost four months, according to an “Elliott Wave” analysis by MF Global Ltd.The Straits Times index tumbled to a more than five-year low of 1,456.95 on March 9. It has since rebounded 32 percent on optimism stimulus measures being implemented by governments around the world will help revive global economic growth.In that time, the index declined and found support at 1,754 on April 8, which signaled the beginning of an uptrend, according to Anantha Rajan, technical analyst at MF Global in Singapore. A rebound from an April 8 low through the intra-day high of 1,947 on April 16 and the subsequent drop to the intra- day low of 1,791.45 on April 28 developed the second wave and confirmed the support for the 1,754-point level, he said. The gauge closed at 1,920.28 yesterday, the highest since Jan. 5.
“As long as previous wave lows are not broken, the rally is likely to continue,” Rajan said. As the first two waves were completed, a third wave has started forming this week, he said.The wave principle is a theory developed by accountant Ralph Nelson Elliott during the Great Depression. He concluded that market swings, or waves, follow a predictable, five-stage structure of three steps forward, two steps back.Elliott said that waves share a variety of features: Wave two never falls below the starting level of wave one; wave three is never the shortest; waves one and five tend to be of equal length; and wave sizes are often related by a series of numbers known as the Fibonacci sequence, wherein each number is based on the sum of the two previous ones.
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