Morning Dew - 11 December 2013

Eyes on the Fed and Budget

JCI rallied, tracking gains of global indices as the market gazes at the possibility of the start of Fed’s tapering this month. Solid readings of nonfarm payrolls data as well as China’s trade data helped to brighten the mood. Also, a prospect of reaching a budget deal at the Capitol Hill is another positive for investors.

Based on Bloomberg survey recently, the Fed is expected to start its tapering (12 out of 35) this month (Dec 17-18), while nine of 35 expect the tapering to start in January and another 14 believe that the tapering will start in March.

At the Capitol Hill, the negotiators were said to be ‘getting close’ to reach a budget deal. If so, it will remove one hurdle for the Fed to start the tapering as well.

China’s Data

China’s retail sales were up 13.0% (YoY) in November, slightly below the consensus gains of 13.2% and slower than in October (+13.3%).

Industrial production also slowed to 10% from 10.3% in prior month. The market had expected production to have gained 10.1% in November.

While both data were below consensus, both remained strong and should not dent the prospect of recovery in China.

Technically Speaking...

JCI continued to move higher on Tuesday as it approaches the next resistance zone around 4,300-4,330. 

Support now holds around 4,200, followed by the recent low at 4,161.

RSI and MACD remain supportive for the index, but Wednesday is likely to see a bit of a breather for the index as the index is prone to short-term dips.

No changes in the reco pool so far.

Day Ahead

Positive set of data and the prospect of a budget deal to be reached have set a stage for the market to end the year on firm footings. Still, domestic data will constrain the JCI’s advance as BI has its own policy path. Next big thing remains the FOMC meeting on Dec 17-18.

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