Further retreat looms for the STI

Traders saw uncertainty hit Asia on Thursday, with the index dropping 1%.

OCBC Investment Research said:

The near 1% pull-back on Wall Street overnight and the poor Nikkei start (down 0.7% now) are likely to cue the local bourse to a further retreat this morning.

As a recap, the STI had already initiated a significant correction yesterday; after an unexpected 0.3% gap-down at the open, the index slipped further to a 1% loss by the close.

And with today's tone likely to remain more pessimistic, we could see the index sliding further towards the immediate base at the 2980 support (various troughs).

Below that, the next base lies at the 2940 (subsequent troughs). On the upside, the immediate hurdle is now pegged at the 3040 support-turned-resistance, while the subsequent obstacle is marked at the 3090 resistance (recent peaks).

IG Markets Singapore meanwhile noted:

Quantitative easing expectations has been slowly coming out of global markets this week. Yesterday traders saw this uncertainty hit Asia, with the STI falling 1%.

In Europe there was a more calming influence from its central bank. The hopes of ECB intervention helped take the edge of eurozone bond sales yesterday. Hopes of policy easing from the ECB are currently having a positive effect in Europe while in the US it is having the opposite effect.

Traders and investors alike have been distracted by QE3, led up the garden path many times and lost sight of the fundamentals as they have become accustomed to being breast-fed by central banks.

But a meeting between the French and Spanish leaders failed to give any clear indication of strong near-term action from policy makers and once again Mr Hollande has thrown the emphasis on the October 19 EU summit.