SINGAPORE (March 20): In normal times, the market should have rebounded earlier and the Straits Times Index should have rebounded 200 points to 2,620. But these are not normal times.

Daily Chart with oversold quarterly momentum

Long-term US treasury yields are rising despite interest rates at zero. A US dollar credit crunch is already underway.

The US Federal Reserve has established temporary dollar liquidity-swap lines of US$60 billion each for central banks in Australia, Brazil, South Korea, Mexico, Singapore and Sweden and US$30 billion each for Denmark, Norway, and New Zealand.

The swap lines will be in place for at least six months. In addition, the Fed and the European Central Bank have both unleashed quantitative easing programmes to inject liquidity into the system.

And yet, the rebound has been so meagre.

Quarterly momentum is on the floor, and it has only bounced a bit. It should have rebounded a lot more, back to 88. Its own moving average is at 91.7. Quarterly momentum is at 75 after making a low of 72 on March 19.

Daily chart with oversold short-term indicators

Stochastics has been at the bottom of its range for 10 sessions. The 21-day RSI rebounded from a low of 13, not seen for many years. This is equivalent to single digits for the more widely followed 14-day RSI.

ADX and –DI are at their highest level in more than three years. The only mildly positive signal this week is a negative divergence developing in –DI which may mean that it starts to fall. If so, selling pressure has alleviated and the STI could continue to rebound.

The weekly long-term chart (see below) indicates that the STI is at its lowest level since the global financial crisis in Feb 2009 and fell through the twice tested 2,528 to 2,623 support level. This is now a resistance area.

STI weekly chart on logarithmic scale

The new support has been established at 2,311, the close reached on March 19. The intra-day low was 2,303.