Although the Straits Times Index barely moved week-on-week, ending up just a point at 3,231, it stayed above its 200-day moving average which stood at 3,221 as at June 2. With local 10-year bond yields on an upward trend ending the week at 2.83%, growth stocks stayed under pressure. The May high was 2.92% and it’s likely that local 10-year bond yields reach and breach this level given the spate of rate hikes articulated by the US Federal Reserve.
The market’s underlying steadiness on June 3 was attributed to gains in the Jardine group with Jardine C&C, Jardine Matheson Holdings and Hongkong Land inching higher. Oversea-Chinese Banking Corp and United Overseas Bank also held firm on June 3.
Hence the chart pattern of the STI continues to show latent strength, with the index holding on to its move above the 200-day moving average for five consecutive trading sessions.
Further out in the coming weeks though, market movements may revert to being volatile. The 50- and 100-day moving averages currently at 3,307 and 3,311 respectively - are showing signs of a negative cross. Hence, support should be kept tight at 3,221. If the STI moves below this level, trading patterns are likely to turn volatile.
Much depends on whether quarterly momentum - which has risen towards its equilibrium line - can breakout above this level. At present, market volume is moderate and probably insufficient to trigger a breakout.
