SINGAPORE (July 3): Support at the 2,620 area has held for the Straits Times Index, as has its 50-day moving average — currently at 2,607. On July 3, the STI closed at 2,652. The moving average has turned up since the week of June 22–26, and the index has moved above and away from the indicator. These are positive signs for the STI. In addition, quarterly momentum, which had retreated towards its equilibrium line, has bounced off this level (see chart 1).
Elsewhere, 21-day RSI has managed a minor upturn; short term stochastics continues to fall. ADX — which identifies market trends — also continues to fall. A reading in the teens, the STI’s ADX is at 15, suggests a sideways range. The 15 level is viewed as low, although ADX has been lower. The DIs are negatively placed, but should turn positive if the index moves sideways to mildly higher this week.
Based on the chart pattern that is developing, the 50-day moving average, which is rising at around one point a week, is acting as a support line. Since it is at 2.607, this is viewed as the current support. Resistance is shifted to the June 10 high of 2,800. Since ADX is languishing, a break above 2,800 is unlikely in the near term. The main negative signal this past week (June 29–July 3) is the dwindling volume, which continued to contract on days the index rose.
The local market could well remain steady even if global and US markets take a volatile turn. This is because North Asian markets are likely to stay on a firmer footing.
