The Straits Times Index fell 23 points week-on-week in the week of Aug 15-19, with most of the decline materialising on Aug 19, ending the week at 3,246. This takes the index to within a whisker of the confluence of the 100- and 200-day moving averages at 3,237. The 3,237 level is likely to provide some support. Both moving averages are relatively flat. Their direction is important as the STI needs to stay above these moving averages if the market is to stay resilient. A move below these moving averages and a downturn by these moving averages would be negative.
Quarterly indicators are neutral. Quarterly momentum retreated from a high level in mid-August to its equilibrium line, which usually acts as a support line. As such, quarterly momentum could rebound. Short term indicators are retreating from the high end of their range. With the different pressures, the STI may remain within a narrow range in the near term with some downward bias on the back of declining short-term indicators. There isn’t much visibility as medium-term indicators are neutral. Hence further out, the STI may stay rangebound for some weeks.
Global equity markets are likely to remain hostage to the direction of interest rates, in particular the direction of the 10-year US treasury yield. The 10-year US treasury yield rebounded to a resistance level during the week of Aug 15-19 when it moved to 2.92% as at Aug 19, up from 2.88% a week ago.
As at Aug 19, the yield curve’s inversion persists, with yields on two-year treasuries remaining at 3.24% and above, while yields on the 10-year treasuries continue to hover below 3%. US inflationary pressures have been alleviated but whether this is sufficient to stay the hand of the US Federal Reserve remains to be seen.
