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STI remains resilient as risk-free rates retreat

STI rebounds off support; resistance is at 3,292. Risk-free rates are at the lowest levels since late Aug

Although the Straits Times Index retreated lost 14 points week-on-week during Dec 5-9, the technical position of the index looks quite benign. Prices have rebounded off the 200-day moving average at 3,220, a level that is likely to be a support. The index touched a weekly low of 3,225 on Dec 7 before rebounding to close at 3,245.

Since quarterly momentum remains above its equilibrium line, although barely, it should be able to rebound off this level as the equilibrium line is likely to act as a support. Directional Movement indicators have turned neutral, with ADX retreating.

The STI should be able to continue its rebound which started on Dec 8 towards the resistance area of 3,292-3,000. The STI made a high of 3,292 on Dec 1 establishing this as a resistance. If quarterly momentum is able to rebound off its equilibrium line, the index should be able to move above the resistance area by the end of the year.

Risk-free rates in the US and locally continue to ease. The yield on the 10-year Singapore Government Securities (SGS) ended the week of Dec 5-9 at 2.95%, at the lowest level since late August. In moving to below 3%, the yield appears to have broken below a minor support. It’s early days, but if the breakdown is valid, lower levels could materialise.

Yields on the 10-year US treasuries as at Dec 8 are at 3.4797%, a level that coincides with the 100-day moving average. In the week of Nov 28-Dec 2, the US 10-year treasury yield confirmed a break below its 50-day moving average at 3.88%. Some support could materialise at the current level because the 100-day moving average is likely to provide some support. ADX has turned up and the DIs are negatively placed. However, altough quarterly momentum is declining, it has yet to break below its equilibrium line.

Hence yields on 10-year US treasuries could hover around current levels for a few sessions following which, they may move lower.

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