The Straits Times Index continued to retreat during the week of Jul 22-26, losing 21 points week-on-week to end at 3,426. Towards the end of the week, the decline lost momentum. As such, the STI could continue to ease early in the week of Jul 29 - Aug 2 but rebounding toward the end of the week.
The chart pattern of the STI looks like a minor top. Market observers are concerned that a head-and-shoulders pattern has formed. However, the distorted right shoulder may suggest that this pattern may not have much verve. Nonetheless, the current correction could be deeper than initially indicated. Since the original breakout was at 3,350, this is the area of greatest support. However, the roundophilic number of 3,400 should provide psychological support. The main upward trajectory of the market remain valid.
The FTSE REIT Index has also retreated and ended the week of Jul 22-26 at 652. The breakout level was at the thrice tested 650 level and this should provide support for the retreat. Resistance stays at 670, which was recently tested for the third time since March. An upside of 700 is indicated by the break above 650, and this remains valid.
