STI in danger Zone! What's next?

Today STI drops drastically and closed below 3100. This marks a serious bearish signal for local equity. Let's me briefly explain the seriousness of this price action from a technical perspective.

1. Price closed below psychological level 3100
2. Price closed below critical support level 3100 - 3120 from last year Oct 2010
3. Price closed below 50MA (mid term) and 150MA (long term)
4. 50MA is sloping down and 150MA is almost horizontal
5. Today is a bearish strong candle (i.e. sellers are gaining momentum)
6. Declining counters to advancing counters is 3.3 : 1
7. A big majority of component stocks are exhibiting toppish pattern

The next question is what do we expect next for STI?
At this moment, it is too early to say if this is a correction to the underlying bull trend or a reversal. Always remember Market works on a discounting mechanism. Therefore, time will tell and we, as traders, will follow the market flow.

In my personal opinion*, the next few trading days might see STI pulling back to break-down level 3100 before dropping to 3044 - 3050 level (this is a critical level as it represent the resistance form from the 2 peaks in April and August 2010 + 50fib retracement from end June).

If this is a false breakout (low probability), do watch for reversal candlestick formation at the 3100 - 3120 level.

* Disclaimer: Trading is a risky venture. All above are my personal opinions and in no situation am I liable for any loss or damages incurred from following them.