The Straits Times Index rallied to touch its gradually declining 200-day moving average, currently at 3,191, before ending the week at 3,179 on Feb 2, up 20 points week-on-week.
Although the STI dipped below the confluence of a support area and the 50-day and 100-day moving averages at 3,140 and 3,147 respectively briefly, the index manage to rebound off this area, establishing it as a support.
Quarterly momentum remained intact throughout the short term consolidation. ADX and directional movement indicators are neutral, and could turn positive. As a result, the break above 3,150 in early January, and the retreat at the end of January has confirmed this area as a support level. Support stays at the breakout level. The upside from the breakout of 3,330 remains valid at this juncture.
The Hang Seng Index remains in a downtrend. The index needs to regain the 16,380 level if it is strengthen, as this is a former support level that was breached on the downside. The HSI closed at 15,533 on Feb 2.
On Feb 1, following the Federal Open Market Committee (FOMC) meeting, the yield on 10-year US treasuries (10YUST) fell to 3.8873%, ahead of January’s jobs report announced on Feb 2.
Technically, the 50-day moving average of the 10YUST at 4.0715% has crossed below the 200-day 10YUST at 4.0889% on Feb 1, causing the 10YUST to fall. Meanwhile, both quarterly momentum and directional movement indicators appear to confirm an easier phase all round.
See also: STI steadies despite overbought US markets and rising US risk-free rates
Increasingly, it appears that the rate hike cycle is behind us, and economists and market strategists are expecting the Federal Funds Rate to ease by the second half of the year.
