(Bloomberg) -- Singapore’s benchmark Straits Time Index is set to fall another 13 percent before finding a so- called support level, according to an “Elliot Wave” analysis by DBS Group Holdings Ltd.A five-month rally in the index peaked at an 11-month high on Aug. 3 when the measure failed to break a resistance point at 2,700 points, DBS analyst Yeo Kee Yan wrote in a report yesterday. The gauge has lost 4.6 percent since then, closing at 2,559.57 yesterday.“A consolidation period follows the completion of a five- wave rally that typically retraces 38.2 percent of the prior gain,” Yeo said. “For the Straits Times index, the 38.2 percent downward retracement is at 2,225.”
The Straits Times Index has risen 76 percent from a five- year low on March 9 amid growing confidence stimulus measures and lower borrowing costs will lift the world out of recession. The Elliot 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.In addition, the 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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