Although the Straits Times Index formed a shooting star on Dec 14, followed by a black candle on Dec 15, the retreat or pause is likely to be tempoarary. The chart pattern looks increasingly like a base formation with the top of the base staying at 3,150, a level that acts as the neckline and breakout level. Support has been established at 3,050.
On a positive note, the STI has been able to move above its still declining 50-day moving average at 3,113. The STI ended the week of Dec 11-15 at 3,116, up 6 points week-on-week. Despite the meagre price movement, short and medium term indicators have formed positive divergences with the index. In addition, ADX has fallen to neutral levels and DIs are also at neutral levels after staying mainly negatively placed since August.
Elsewhere, the US 10 year treasury yield (UST10Y) has fallen to a low of 3.92% as at Dec 15, and is now below its 200-day moving average at 4.02%. In the short term the UST10Y appears mildly oversold and a temporary bounce cannot be ruled out ahead of Christmas.
In sum though, lower US risk-free rates imply a less negative outlook for the US REITs listed on the SGX. Furthermore, the US REITs in the US have rallied somewhat since end-October. The big cap S-REITs should also be able to hold on to their gains.
