STI down 0.2%

A further pullback is expected.

OCBC Investment Research said:

The retreat on Wall Street overnight and the negative Nikkei start (down 0.6% now) are likely to dent local sentiment this morning.

Despite a positive start yesterday, the index ended with a 0.2% loss by the close; this bearish technical sign suggests that the market could have reached a near-term top and a further pullback from here is likely.

For now, we still peg the immediate support at 3200, with 3150 being the next key base.

On the upside, 3230 (key peaks) remains the immediate obstacle for now, as the subsequent key hurdle lies at the 3280 resistance (key peak in Jan ’11).

IG Markets Singapore meanwhile noted:

Asian markets are likely to pick up the tab from Western markets softening last night. Yesterday, the Nikkei 225 already suffered some profit-taking as it slipped 0.8%.

The Japanese blue chip index has rocketed more than 20% since mid-November on the back of promises that the BoJ will ease policy significantly. Both Japanese equities and the yen are showing signs of a small correction, given the size of the moves recently this was to be expected.

If the BoJ starts to fulfil on these promises there is likely to be further currency weakness, which will once again fuel further gains for the Nikkei. This is one of the main reasons that many analysts feel Japanese equities could outperform their peers in 2013.

Closer to home, the STI dipped 0.2% yesterday but is still in healthy territory above 3200. Like most regional markets, excluding Japan, we are looking at a flat open for the STI this morning.