With the index rangebound, directional movement indicators continue to stay within neutral readings. ADX is at 13, a relatively low level confirming the lack of a definite trend. The DIs are more or less neutral with a mild negative bias.
In the first week of October, the STI may remain within much of its September trading range. While it is a bit early, there have been at least two notable October crashes, in 1929 and 1987. Generally October is a skittish month for the markets, although this time it could be different.
The main negativity surrounding the market - and not just the SGX - but other developed markets, is the upward trend of risk-free rates, led by 10-year (10Y) US treasury yields.
Although a small gravestone doji has appeared on the candlestick chart of the 10-year US treasury yield, it is likely to have a limited impact with a minor retreat. The 10Y yield rose to a high of 4.6% before easing to 4.54%. The 10Y yield needs to fall below 4.2% for weakness to materialise.
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In the meantime, its uptrend appears relentless. Market watchers reckon that the 10Y yield could get as high as 5% before it does any meaningful retreat. Against this backdrop, equities may be unable to do much upward movement.
