The 21-day RSI of the Straits Times Index is above 80 and it remains at its highest level in more than five years. Negative divergences have not appeared. But there are signs that the STI is running out of steam. Quarterly momentum has turned down during the week of July 14-18 from a new high. Once again, no negative divergences have appeared. Inevitably, in the near term, a pause is likely, with a possible retreat and consolidation.
Since the 4,000 level provided resistance on the way up, it is likely to provide support during the corrective/ consolidation phase. The upside from the breakout above 4,000 is 4,400 and this may be met sooner rather than later.
Although the STI could move sideways, the mid-cap stocks and lower liners could rally. The FTSE REIT Index has lagged the STI and it is about time for the REIT Index to break out and move higher.
See also: STI to continue correction; here are the supports for Sembcorp, DBS and STE
