STI's short term indicators are at the higher end of their range and this may cause prices to ease mildly near term
During the week of Aug 8-12, the Straits Times Index rose to a high of 3,301 on Aug 11, and then eased to end at 3,269, down 12 points week-on-week. In the past two weeks, the STI managed to move above a mild resistance area at 3,260 and stay above the confluence of the 50- and 100-day moving averages at 3,236-3,242. Since quarterly momentum – a medium term indicator – moved above its equilibrium line in the first week of August, it is likely to underpin the STI’s position above its moving averages.
Against this background, the STI may find support at the 3,236 to 3,242 area. In the week of Aug 15-19, the market may turn a trifle volatile as short-term indicators are near the high end of their range. If these indicators ease, the index may trade lower.
Yields on the 10-year US treasuries rebounded, but, based on the chart, they could be encountering some mild resistance at 2.96%. As such, the 10-year treasuries yield may ease from current levels, towards 2.70%.
As at Aug 12, the yield curve’s inversion persists, with yields on two-year treasuries remaining stubbornly above 3% and yields on the 10-year treasuries flounders. It appears increasingly likely that the two quarters of mildly negative GDP growth in the US should be viewed as a technical recession. On the other hand, US inflationary pressures have started to abate with the inflation rate easing. In addition, oil prices remain below the psychological US$100 per barrel based on WTI. Whether these alleviations will help to get central banks to pause their rate hike cycle remains to be seen.