Wednesday, November 4, 2009

Linear Regression Analysis on STI

Since I'm teaching H2 Maths tuition, I will be using linear regression analysis in H2 Maths to assist in calculating the most accurate resistance value. For anyone interested in finding me for tuition for A level physics and maths, please see Strategic Tuition and ExamWorld.

The data I will be using would be the points labelled graphically in an earlier post.

We have here the following data from the monthly charts:

Mar 1994 (zeroth month): 2482.9
Feb 1996 (23rd month): 2504
Mar 2000 (72nd month): 2582.94
May 2006 (145th month): 2666.33
Mar 2008 (168th month): 2745.96

In my linear regression analysis, the variable x shall represent the number of months after Mar 1994. The variable y is the value of STI, excluding inflation.

A simple excel calculation when we consider the linear chart:

A simple excel calculation when we consider the logarithmic (base 10) chart:

As we can see, both linear and log charts point to 2754~2756 as the resistance for this month, Nov 2009.

The linear product correlation for both the linear and log charts stands at a high 0.989, signifying a very strong linear correlation between the Straits Times Index and time line.

Well, isn't that expected of trend-lines? :)

So to me, anything between plus minus 10 from the region of 2755 could potentially be a dangerous zone, or a reversal point. In fact, with this calculations, 2739 might have been the peak.

Any new long-term investment in index stocks now would be 'scraping the bottom of the barrel'. An interim peak looks near.

All I hope is for prices to rise sufficiently for me to exit my pennies with minimal losses, of which paper losses have ballooned from 1k to 3k :(

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