The Hang Seng Index - which had underperformed the STI - due to domestic challenges such as a weak commercial property sector, has also broken out and its rally may have legs.
The Straits Times Index rose by 62 points week-on-week to end at 3,624 on Sept 20. All in, the index is up 426 points since the low of 3,198 on Aug 6. Since the smoothed short-term RSI is above 80, the STI is overbought, and is likely to consolidate its recent gains in the coming week (Sept 23-27). The retreat-cum-consolidation is likely to be well supported at 3,500.
Further out, based on a measured move objective following the breakout above 3,499 on Sept 10, the STI’s target is at around 3,800. Its all-time high in 2008, before the Lehman crisis hit markets was 3,870. As important highs are likely to provide resistance, the STI is unlikely to better 3,870 in the near to medium term.
