Morning Dew - 2 December 2013

Awaiting Santa

JCI is entering December on a weaker footing as positive catalysts have dried out somewhat and negative catalysts are still abound.

BI’s hawkish stance on rates, weakening rupiah, fragile current account position, damages from the most recent fuel hike as well as higher minimum wages and poor debt sales result  are the negative factors dragging the JCI down. 

From abroad, improving US economy rather brought risk to the JCI as this will mean the tapering is close, followed by the beginning of a fresh tightening cycle in the U.S.

The only positive factor at the moment is probably the Chinese government’s renewed economic policy which is of course, will need more than just words to bear fruit…

If December is full of wishes, JCI wishes for Santa to come and jolt the index higher to secure a return trip to 5,000 in early 2014.

Payrolls and the Fed 

Payrolls are expected to be at 183k in November, falling below the October’s reading.  Unemployment rate however, is seen improving from 7.3% to 7.2%.

Fed is going to have its last session for the year in December. While there’s still the odds that the Fed will start tapering in December, it is a whole lot likely to have the Fed start taking out stimulus in February or March.

Technically Speaking...

JCI scored the week’s (as well as the month’s) low at 4,202. As support at 4,284 gave way, we are staring at the odds of testing the next support at 4,133. If 4,133 unable hold off the bears as well, we may revisit the old low at 3,837.

Indicators have started to form a bullish divergent pattern. As the index set a lower low, the MACD is still holding up flat while RSI has not set up a lower low. If this pattern is confirmed, we could see some decent rebound on JCI. Until then however, the outlook remains gloomy for coming sessions.

Week Ahead

A new month means a new set of data awaits. For JCI, domestic data will be under extra scrutiny, especially from corners such as inflation, current account, and rupiah. Should the CAD position remains precarious, we should not be surprise who’s going to trigger a hike again.

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