The more sombre observation is that the STI’s volume has contracted. This may have to do with market-watchers staying on the sidelines, as they observe liquidity in the local market gradually shrinking.
Interestingly, yields on 10-year US treasuries, which is the risk-free rate, appears to have moved below a head-and-shoulders like top formation with the neckline at 4.57%. This level has been breached on the downside as the 10-year yield is at 4.386%, and below the 50-day moving average support level of 4.42%. There is support at the 4.2% to 4.22% range, and the 10-year yield is unlikely to move much below this level for the rest of the current month.
If so, the sell-in-May adage continues to hold water given the correction and temporary bounce in the S&P500. This does not preclude a summer rally as the 10-year yield could hang around 4.2% level for the next 2-3 weeks. Depending on the state of indicators by then — and they may have weakened — the 10-year yield could be in a position to move lower.
