STI forecast to open weak after eight consecutive days of gains

A potential technical correction is expected in the near term.

OCBC Investment Research said:

The more than 1% retreat on Wall Street last Friday night and the poor Nikkei start (down 1.6% now) are likely to spook the local bourse to a pessimistic opening this morning.

Following the 0.2% higher close on Friday, the STI has already registered eight consecutive sessions of gains; this sets the stage for a potential technical correction in the days ahead.

With the odds of a pullback increasing significantly now, we could see the index heading back to the 2950 resistance-turned-support. Below that, the next key support lies at the 2900 key resistance-turned-support.

On the upside, the immediate resistance is now pegged at the 3000 key psychological obstacle, with the subsequent key resistance lying at the 3030 key peaks.

IG Markets Singapore meanwhile noted:

Generally, the second half of the year has seen a pretty solid start with the euphoria of the EU summit and moves by various central banks to bolster their respective economies.

However, many investors are of the view that these measures will have little positive impact and that the second half of the year will be much the same as the first - a constant grind with the same issues preventing the market from any material gains.

Just as Andy Murray was never likely to win Wimbledon, investors never really expected the crisis to be solved after one EU summit. Spanish yields creeping back up towards 7% is evidence of that.

The STI has enjoyed eight straight days of gains as it confounded critics with its steady rise to 2978 on Friday. Today could see some of those gains snatched away with the futures market pointing to a weak opening.