The rally by the Straits Times Index following its breakout above 3,150 has not run its course. However, the overbought position of short term indicators could lead to a temporary pause. Any retreat is likely to meet with support at 3,201, the level of the 200-day moving average.
The break above 3,150 and subsequently 3,190 indicates an upside of around 3,330. Resistance appears at 3,380. This leaves some short-term upside on the table for the market.
The top of the rally could be higher with the STI approaching a multi-year resistance in the 3,550-3,600 range. Unlike the S&P 500, which is on the cusp of a new high, the STI’s all time high of 3,831 back in 2007 would be challenging to meet.
In the meantime, US risk-free rates as represented by the yield on 10-year US treasuries has found support at around 3.85% to 3.87%. The risk-free rates may stage a mild rebound as debates range in the US of whether inflation is truly beaten and the Federal Reserve federal open market committee decides on a rate cut in 2024.
