STI to initiate technical rebound

Sharp corrections were seen in the STI as it moved into bear-market territory.

OCBC Investment Research said:

The generally less muted reactions on Wall Street overnight, coupled with the mildly positive Nikkei start (+0.2% now) are likely to offer some relief to the local bourse this morning.

Following a bearish break of its key 3-year uptrend support last Friday, the STI plunged another 1.7% yesterday to close at its intraday low. As a result, the medium-term outlook has turned significantly negative.

But with today's tone likely to turn a tad more upside biased, we could see the index initiating a technical rebound in an attempt to narrow the 2716-2740 gap resistance formed yesterday.

Beyond that, the next resistance is pegged at the 2760 support-turned-resistance. On the downside, 2690 (minor trough) is the immediate support, as the subsequent base lies at the 2650 support (next minor trough).

IG Markets Singapore said:

In Asia, China seems to be ramping up its infrastructure spending. But rather than announcing a massive spending spree officials seem to be quietly fast-tracking approvals for infrastructure projects around the country.

This will still have the effect of stimulating its flagging economy while hopefully avoiding the creation of asset bubbles through economic exuberance.

After yesterday’s savage sell-off, many markets are in for a dead-cat bounce of a rebound today. Japanese stocks have opened higher this morning while the futures market points to a firmer open for the STI.

The sharp corrections we have seen in the STI leave it sitting just below the 2,700 floor this morning having moved into bear-market territory.