The Straits Times Index stayed within a narrow range during the week, ending at 2,539, up 11 points week-on-week but below the 50-day moving average at 2,596 and its 100-day moving average at 2,589.
Both moving averages appear poised for a negative cross. This would be ominous, except that volume levels are at a low ebb.
A Bloomberg report said the index jumped, if a 19-point gain one-day move can be considered a jump. On the other hand, the STI did start the month on Aug 3, at 2,484.
On a more optimistic note, ADX has turned down, suggesting that the negatively placed DIs, the downturn by stochastics, and the impending negative cross by the moving averages should have a minimal impact on prices.
Quarterly momentum continued to hover around its equilibrium line. As the market had strengthened in June, quarterly momentum could break down, below its equilibrium line in Sept if the STI is unable to regain the 2,602 to 2,627 range.
In the coming week — the first week of Sept — the index may remain within its narrow range. Support is at the Aug 3 low of 2,484, which could also be a breakdown level. Resistance is at the 2,602–2,627 area.
On the macro front, inflation is becoming something of a concern, in part because of continuous quantitative easing. If so, yields could rise, and that would be no bad thing for banks. Bank stocks are important components of the STI, and they could stage a rally. In fact, United Overseas Bank’s quarterly momentum has strengthened, its price has moved above the 50- and 100-day moving averages, and volume expanded on this small uptick.
