During the week of July 10-14, the Straits Times Index gained 109 points to end at 3,248 on July 14. On July 7, the dragonfly formation on the candlestick chart did indeed lead to a rebound. However, after three white candles, a black candle has appeard on July 10. But its pattern isn’t indicative of a top yet. However, there is some minor resistance at 3,260, which may curb investor and punter enthusiasm. The main resistance sets in at around 3,323 or thereabouts. These resistances and the support at 3,140-3,150 place the STI’s movement within a trading range.
The STI’s quarterly momentum has rebounded to its equilibrium line, a level that may provide some resistance.
The reason why investors shouldn’t get too carried away with the 109-point rebound is because of the yield of the 10-year US treasuries chart. The 10-year US Treasury yield rose to a high of 4.09% before retreating. Its current level of around 3.78% is above the confluence of the 50-, 100- and 200-day moving averages at 3.705%, 3.65% and 3.3.698% respectively. Hence the confluence of the moving averages is likely to provide sufficient support to stop the 10-year Treasury yield from falling further.
As the 10-year US Treasury yield finds support, the US equity market’s rally may lose its legs. That would cause smaller markets like the SGX to ease. As it is, the STI has been trading within a range, and is unlikely to break above the top of that range in the near term.
