Tuesday, May 31, 2016

When the STI Ends Lower in May, it Often Slides Further in June

In this month of May, the STI has dropped from the close of 2838.52 at the end of April to a low of 2713.47 on 13 May.   After that, it slowly creeps up to close at 2791.06 today, the last day of the month of May.   At 2791.06, the STI has ended 47.46 points down for the month.

The daily chart of the STI for the month of May is shown below:

Figure 1.   STI daily chart for May 2016

Excluding this year, the STI has ended the month of May down 10 times since the year 2000.   It was down in the years 2000, 2001, 2002, 2004, 2006, 2010, 2011, 2012, 2013 and 2015.

Let's look at the STI daily charts of those years for the months of May and June.   They are shown in the figures below:

Figure 2.   STI daily chart for May - June 2000
Figure 3.   STI daily chart for May - June 2001
Figure 4.   STI daily chart for May - June 2002
Figure 5.   STI daily chart for May - June 2004
Figure 6.   STI daily chart for May - June 2006

Figure 7.   STI daily chart for May - June 2010

Figure 8.   STI daily chart for May - June 2011

Figure 9.   STI daily chart for May - June 2012

Figure 10.   STI daily chart for May - June 2013

Figure 11.   STI daily chart for May - June 2015

From the figures above, it can be seen that:

i)  There were 7 years in which the lowest point of the STI in June was below its lowest point in May.   The 7 years were 2001, 2002, 2006, 2011, 2012, 2013 and 2015 (Figures 3, 4, 6, 8, 9, 10 and 11 respectively).  

ii)  In the cases of 2001, 2006, 2011, 2012 and 2013 (Figures 3, 6, 8, 9 and 10 respectively), the STI subsequently found a bottom in June and thereafter retraced upwards.

iii)  However, in the years 2002 and 2015 (Figures 4 and 11 respectively), it simply continued to slide down in June right till the end of the month without finding a bottom.

iv)  On the other hand, in the 3 other years in 2000, 2004 and 2010 (Figures 2, 5 and 7 respectively), the bottoms it reached in May proved to be bases strong enough for it to bounce off and trend higher in June.   In the year 2000 (Figure 2), the bottom was reached only on the last trading day of May.
Hence, in 7 of the last 10 cases in which the STI had ended down in May, it continued to drift lower to bottom out or just trend lower without forming a trough at all in June.

Therefore, since the STI has ended down this May, based on past data, it is likely that it will fall in June and reach a level that is below its lowest point in May.

So, will the STI really follow what it did in previous years and slide lower this June?   Let's watch the developments.


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