In the near term, the STI may continue to move within a narrow range with support remaining at the breakout level of 3,250 a level that almost coincides with the rising 50-day moving average, currently at 3,245. Resistance remains at 3,350. Eventually, the index should be able to clear this resistance area and when it does, a new upside at significantly higher levels are likely.
The chart pattern of the yield on the 10-year US treasuries looks somewhat weak, which should be positive for equities. A major support area lies between the 50-, 100- and 200-day moving averages at 4.45%, 4.29% and 4.33% respectively. The 10-year US treasury yield is at 4.47% as at May 24. The moving averages coincide with a support area at 4.2% to 4.22%. Quarterly momentum of the 10-year yield has fallen and is at its equilibrium line. Neither indicator nor 10-year yield have broken down yet, but these levels bear watching.
