STI initiates mild technical rebound

Tuesday’s tone is forecast to remain more upbeat.

OCBC Investment Research said:

The strong rebound on Wall Street overnight is likely to lift local sentiments this morning; meanwhile, the Nikkei had a muted start (flat at the moment).

As a recap, the STI had already initiated a mild technical rebound yesterday with a 0.2% higher close.

And with today’s tone likely to remain more upbeat, we could see the index inching higher in the direction of the 2980 key support-turned-resistance.

Beyond that, the subsequent obstacle lies at the 3000 psychological hurdle. On the downside, 2930 (various troughs) is the immediate support, followed by the next base at the 2900 psychological support.

IG Markets Singapore meanwhile noted:

Risk-on is the new game in town as markets rallied on hopes the dreaded fiscal cliff can be avoided for another year.

Last night saw some big gains across Wall Street and Europe as traders warmed to comments from US politicians that a compromise can be found to stall US$600 billion of tax hikes and spending cuts.

President Obama is keen on taxing America’s rich more while shying away from the middle classes. Much is still to be decided but for now lawmakers are willing to find common ground to avert the fiscal cliff and prevent the US economy slipping back into recession.

The benchmark S&P 500 rocketed 2%, its biggest daily gain for more than two months. The Dow Jones Industrial Average lifted 1.7% while the NASDAQ powered up 2.2%.

Stronger-than-expected US home sales data also helped improve market sentiment and is likely to set up a bullish day across Asia.

European markets rallied despite France being downgraded by Moody’s from Aa1 to Aaa. The FTSE 100 shot up 2.4% while in Germany the DAX gained 2.5%.

For Singapore, at least for today, it spells good news for the STI.