The Straits Times Indecx continues to rise, ending the week of July 8-12 at 3,497. The definitive break above 3,450 indicates a target of 3,613. The chart pattern looks like a bull flag suggesting a short-term burst by the index.
More interesting technically, is the breakout by the S-REIT indices. The FTSE REIT Index has broken out of a minor base formation at 650 during the July 8-12 week. Immediate resistance is at current levels, at around 670. However, an initial upside of 700 is indicated by the break above 650. Since the REIT Index has formed positive divergences with both short and medium term indicators, a break above 670 could materialise after a short pause. This would give a new upside of 720.
Retreats are likely to be mild, with the REIT Index pulling back no more than 10-12 points.
In the meantime, the STI’s support is some way away at, at 3,450.
The 10-year Treasury Yield is at 4.22% as at July 12. A breakdown level is at 4.20% to 4.22%. A breakdown would see the yield drop to a lower level, nearer 4%. Since ADX has turned up from a low level, and DIs have turned negative, such a move could well materialise. This in turn would buoy S-REITs.
See also: STI steadies despite overbought US markets and rising US risk-free rates
