Market emotions appear to be following the direction of yields on 10-year US treasuries (the risk-free rate). When yields rise, volatility abounds. When yields fall, the markets calm down. The 10-year yield, which fell towards the confluence of its 50-, 100- and 200-day moving averages at 3.743%, 3.652% and 3.698% stood at 3.85% as at July 21, and has now rebounded off this area, establishing it as a support area.
Earlier in the month, the 10-year yield rose to a high of around 4.09%. However, as inflationary pressures receded, risk-free rates eased. But, the US Federal Reserve chair remains hawkish and market watchers believe at least one more rate hike is likely.
During the week of July 17-21, the STI gained a further 30 points to end at 3,278. This takes gains by the STI to 139 points in two weeks. The main resistance sets in at around 3,323, and short term RSI is approaching the top end of its range which represents increasingly overbought levels. As the index moved higher, volume receded, suggesting that the resistance at 3,323 or lower at the roundophobic 3,300 may stop the rally.
Overall, the STI may trade within a relatively wide range, with support at 3,150, and resistance at 3,323.
