Can Singapore STI rally?

The sharp rebound on the DJI last week sent positive energy to other regional markets. The Singapore market only reacted today as the benchmark STI index rose 71.48 points or 2.5% to close at 2919.21 points. The STI is still below the short term average (30 day average) which is currently at 2,944 points while the longer term averages (60 and 90 day average) is at 3,050 points. All short to long term averages are still declining indicating that the STI is still in a major down trend.

However, the STI may have found temporary support now as the Relative Strength Index (RSI) indicator is showing a positive divergence. (See chart below)

It is difficult to predict whether the STI can rally at this point of time because the STI only rebounded today. If the STI is able to go higher and stay above 2,950 points, we can expect a rally to test the 3,000 points resistance level. Failing to stay above 2,950 points may cause the market to weaken further, and probably test the major support level at 2,740 points.

Commentary and Analysis by Benny Lee

Daily STI chart as at 22 July 2008, using NextVIEW Advisor.