SINGAPORE (May 29): The Straits Times Index is trying to strengthen, based on the chart pattern, but short term indicators remain weak. In the week of May 26-29, the STI kept pace with the declining 50-day moving average, currently at 2,522 (and declining at around 10 points a day) against the STI’s 2,510. Although the index closed 4 points lower on the session, it formed a small white candle, indicating that the session on May 29 opened lower and closed higher. This small white candle was accompanied by a surge in volume which is normally a bullish sign.

On May 29, this surge was due to the re-balancing of the MSCI Singapore Index in its semi-annual review. Mapletree Logistics Trust was added while ComfortDelgro, SATS, SembCorp Industries and Singapore Press Holdings were removed.

The MSCI Small Caps Index added AIMS Apac REIT, Ascendas India Trust, Cromwell European REIT, Keppel Pacific Oak REIT, and Lendlease Global REIT.

No surprise then that the stocks in the STI that were removed from the MSCI Singapore Index fluctuated on May 29, as ComfortDelgro, SPH, Sembcorp Industries and SATS remain components of the STI.

Technically, short term indicators remain lacklustre. Short term stochastics is likely to continue to retreat as could the 21-day RSI. ADX - which measures the market’s ability to trend - is turning up as the DIs stay negatively placed. This stance suggests some price weakness.

On the other hand, quarterly momentum is moving sideways and has held on to a support and its own moving average, albeit tentatively and hence looks like it is in a base formation.

Similarly, annual momentum and two-year momentum are both flat and have shown minute movements despite the market’s sharp drop. They too, could be in the early stages of a base formation.

In the first week of June, the range maybe narrow. Resistance has been established at the 2,620-2,650 range. Immediate support appears at 2,380-2,389. While the STI could stay locked in its range, individual stocks could gain some strength.

Notably, as the circuit breaker is lifted in various phases, there could be a temporary rebound among the retail REITs.