Last evening, in the National Day Rally speech, Singapore?s Prime Minister Lee Hsien Loong unveiled numerous exciting projects for the coming years in line with the new slogan that Singapore is a city of possibilities. Of economic interest is the increase in the longer term economic growth (5- 10 years) of the country from 3-5% to 4-6%. The government also highlighted measures to tackle the challenges of a widening income gap and an aging population. To this, the government is also planning to raise the official retirement age of 62 and to increase the interest rate for CPF savings by 1%, cap at a maximum of S$60,000. Other measures include more upgrading and renewal programmes for public housing, re-employment of older workers, a fourth University and scheme to monetise HDB flats.

Overall, it painted a fairly positive picture of the future for Singapore, although for the near term, PM Lee also highlighted that the volatile situation in the US may affect Asia in the next 3-6 months.

This, together with last Friday?s unexpected cut by the US Federal Reserve to lower the interest rate it charges banks should give trading this week a boost after the past few sessions of selldown in Singapore. The Fed reduced rate by 0.5% to 5.75%, but left the federal funds target rate unchanged at 5.25%.

The Straits Times Index (STI) sliced through all our forecasted support levels and hit a low of 2,962.01 on 17th August and reversed thereafter in late afternoon, closing at 3,130.71. The plunge downwards has broken through the medium-term uptrend line, this might not bode well for the STI over the next few weeks.

However, given the extent of the correction, we can expect a rebound in the week ahead, which has been signaled by 2 indicators. The first being the Doji candlestick formation on the 17th of August that was on the back of very high volume. The second is that the short-term RSI and stochastic indicators are trading within oversold regions.

Elliot wave counts indicate the STI is currently undergoing wave 4 of a 5- wave up cycle.

Our forecasted rebound should face strong resistance around the levels of 3,250 - 3,350. A break above this zone would result in the index testing the medium-term uptrend line. This would be a crucial gauge of the market strength going forward. Should the STI break above the trend line, we can expect a test of support on that up-trend line. The support of that trend line would need to hold to signal that the STI would climb higher.