Although the Straits Times Index closed at 3,202 on May 19, down 6 points week-on-week, this was well off the low for the week. The index had closed at 3,173 on May 17 before renbounding. As a reference point, the mid-March closing low was at 3,129. Short term smoothed RSI fell to around 27 on May 17, but has rebounded. Quarterly momentum rebounded but remains in negative territory. Directional movement has not turned positive. Against this background, any further rebound is likely to encounter resistance at 3,238 initially, and then at 3,247.
The 10-year US Treasury yield rebounded from 3.41% on May 12 to 3.63% on May 19, causing US equity markets to turn volatile. The rebound also takes the yield above its 200-day moving average at 3.57%.
The 10-year yield on Singapore Government Securities ended the week at 2.84%, up from 2.73% as at May 12. The inverse correlation between risk-free rates and the STI’s movement has been strong over the past one year. Hence, with the rebound in risk-free rates, the index may not be able to move out of its trading range. Its current rebound which started on May 19 is likely to be temporary.
