The Straits Times Index, which rose 20 points week-on-week to end at 3,110 on Dec 8, is undergoing what could turn out to be a base formation. Resistance is raised to 3,180, which is likely to be the top of the base. This level coincides with the declining 100-day moving average at 3,184. During this move, the STI is likely to move above its 50-day moving average at 3,121. The bottom of the base is at the 3,045 to 3,050 range.
During the local market’s next move upwards, it could struggle somewhat as the technical indicators of risk-free rates could be approaching mildly oversold levels. In particular the yield on the 10-year Singapore Government Securities are down to 2.85% after a break below a top formation. However ADX is at an overstretched 44 after retreating from 50. This suggests that the decline is likely to abate with the possibility of a mild bounce.
The yield on 10-year US treasuries (UST10Y) is less oversold as its decline started at a later date, end-October. The UST10Y fell to 4.12% before rebounding, ending at 4.17% on Dec 8. Its 50-day moving average, currently at 4.0193 may provide some support.
