Fiscal Impasse Set to End
- US House of Representatives will vote a deal later which according to House Speaker John Boehner will not be blocked by Republicans.
- Government will be funded through Jan. 15th 2014 while the debt limit will be suspended until Feb. 7th, when another bout of confrontation awaits.
- Fitch Ratings recently put US AAA credit grade on the negative watch while according to Standard & Poor’s the 16-day shutdown cost the economy $24 billion.
- The deal is not the end of the problem, but simply moving the problem for another four months. It’s simply ‘kicking the can down the road one more time’.
Points from Fed Beige Book
- Four districts had slower growth , while eight saw steady expansion amid fiscal deadlock.
- Growth remained ‘modest to moderate’ with consumer spending continued to gain and business investment continued to grow.
- Employment growth ‘stayed modest’ in September while price and wage pressures ‘stayed limited’. Uncertainties were spotted due to shutdown, but generally retailers stayed optimistic about the holiday shopping season.
Technically Speaking...
- JCI is still struggling to break through the EMA resistance at around 4,530. A successful break will open up a way towards 4,900 price objective.
- Both MACD and RSI are showing signs of turnaround, but still need a stronger push to secure a bullish potential. Despite sluggish advance on the price side, volume has been rising steadily.
- Support is nearest at 4,425, around the 50-day EMA, followed by 4,357/58 (double-bottom support) and a more crucial one at 4,313/14 (double-bottom). If we sink below 4,313/14, we risk another bearish round towards 4,207.
- Resistance will be at 4,543 (pre-holiday high), followed by 4,792 (Sept high). Beyond the latter we may see 4,900.
- A rally in the DJIA overnight is seen boosting the JCI on Thursday. It is likely that the index will break through the resistances and reaches its price objective at 4,900.
- LCGP met its price objective and has been removed from the recommendation pool (see table below) while MDLN is very close to finish line.
Day Ahead
As the Republicans conceded, the budget issue in Washington is over for now. This will resurface in about four months time and will repeat the whole political drama once more. For now, the market cheers the deal and JCI should be joining the party as well.
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