Morning Dew - 29 November 2013

Bottom Fishing

JCI scored  yet another low at 4,202, sparked by failed debt sale before it finally settled the day at 4,234.

Lack of new catalysts put the market mostly on hold as it awaits the next FOMC meeting. While tapering is still on the table, it is likely to be put off until after the next US budget crisis sometime in 1Q14. Likewise, Bank Indonesia is expected to stay on hold in December on rates, but may not hesitate to strike again in 1Q14 if IDR stays weak, or should the current account condition deteriorates.

Traditionally a good month for stocks, the beat up JCI is desperately looking for relief rally in December.

Debt Sale

Poor result from Indonesia’s first ever domestic dollar-bond auction sparked a renewed concern over the flight of capital, sending the rupiah beyond 12k per US$.

Just $190 million worth of debt was sold, far below the target of $450 million, according to the Ministry of Finance.

As Fed’s tapering approaching, it is likely that more money will be repatriated to US$-based assets, adding more pressure to IDR.

Technically Speaking...

JCI scored yet another low at 4,202 but bounced off afterwards to end the day at 4,234. 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.

Day Ahead

Worsening rupiah could limit the JCI’s upside potential as this could dent the profitability of companies which depend on imports, but on the other end benefit the companies that rely on exports. How BI will cope with this rupiah weakness will be a theme for the domestic market amidst a lack of catalysts from abroad. This Friday the index is expected to continue bottom-fishing.

Click here to download the full update (PDF)

Morning Dew - 28 November 2013

Waiting for Santa

JCI scored another low at 4,220 before it finally settled the day at 4,251.

Lack of new catalysts put the market mostly on hold as it awaits the next FOMC meeting. While James Bullard said that tapering is still on the table, it is likely to be put off until after the next US budget crisis sometime in 1Q14. Likewise, Bank Indonesia is expected to stay on hold in December on rates, but may not hesitate to strike again in 1Q14 if IDR stays weak, or should the current account condition deteriorates again.

Traditionally a good month for stocks, the beat up JCI is desperately looking for relief rally in December.

Durables Fell

US Durable Goods Orders fell 2% in October, vs. 4.1% increase in September but in line with consenus. Ex-transport items orders fell 0.1%, vs. 0.2% increase in prior month, vs. 0.5% consensus.

Jobless claims fell from 325k to 316k, better than the expected increase to 330k.

Chicago PMI fell to 63 in November from 65.9, but better than consensus of 60.

U Mich Confidence in November was reportedly up to 75.1 from 72. Better than 73 expected earlier.

Technically Speaking...

JCI scored another low at 4,220 but bounced off afterwards to end the day at 4,272. 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.

CLPI has been removed from the reco list as it fell below its risk level at 580. INDF has met its entry point and currently it is active.

Day Ahead

US public holiday is seen sapping the energy or at least the market’s appetite to make some big moves. Lack of new catalysts may limit JCI as well, but after several pounding, the index may see some rebound this Thursday.

Click here to download the full update (PDF)

Morning Dew - 27 November 2013

Waiting for Santa

JCI tumbled again even as the US stock indexes firm across the board. The Dow is above 16k, S&P above 1,800 while the NASDAQ broke through 4k mark. 

Lack of new catalysts put the market mostly on hold as it awaits the next FOMC meeting. While James Bullard said that tapering is still on the table, it is likely to be put off until after the next US budget crisis sometime in 1Q14. Likewise, Bank Indonesia is expected to stay on hold in December on rates, but may not hesitate to strike again in 1Q14 if IDR stays weak, or should the current account condition deteriorates again.

Traditionally a good month for stocks, the beat up JCI is desperately looking for relief rally in December.

Housing and Confidence Data

Building permits gained 6.2% in October from prior month after a 5.2% increase in September. August data on the other hand, showed a 2.9% decline.

Meanwhile, house price index slowed to 0.3% after a 0.4% increase in August.

Consumer confidence however, ticked down to 70.4 in November, after it was expected to inch higher to 72.6 from 72.4 a month earlier.

Technically Speaking...

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.

The fall on Tuesday was also accompanied by a jump in volume, but not as high as the one saw on Friday. This is not a good sign for the bulls. Despite the RSI had curled up a bit, the Tuesday fall skewed the curve back to the oversold area. MACD too, has fallen, completing the bearish outlook for the near-term.

PGAS has been removed from the reco list as it fell below its risk level at 4,600. 

INDF has been added to the list. Entry area suggested around 6,500-6,600, with risk set below 6,200 and target set at 7,400, implying a 1:2 risk-to-reward ratio (400 vs. 800)

Day Ahead

US durable goods, jobless claims, University of Michigan confidence index, and Chicago PMI are set for release on Wednesday. With Thanksgiving looms large on Thursday, the US markets may be thin, which may translate to Asian markets as well. Iran impact seems to be very much limited in the short-term. JCI may see rebound over a steep fall on Tuesday.

Click here to download the full update (PDF)

Morning Dew - November 26th 2013

Iran Deal

DJIA pushed slightly higher as Iran deal to curb its nuclear activities buoyed the markets.  In return, Iran will get some easing for its sanctions on oil, auto parts, gold and precious metals.

Iran’s deal is also seen good for putting pressure on oil prices as Mid-East tensions will be less worrisome than usual.

With December closing in, there’s a good chance that the upside push is about to continue, given that December is usually a good month for stocks. Hence, a good potential for the Dow translates to a good potential for JCI as well. Even if the JCI lost its correlation with the Dow, positive investors’ mood from abroad could at least limit the downside for JCI.

S&P Valuation

Pending home sales fell 0.6% in October, the fifth in a row as borrowing costs went higher. The reading was far from what had been expected as consensus was at 1% gain month-on-month.

S&P valuation is now at its top level since May 2010. While current PE stands at around 17x, the ratio itself was at 17.5x back in October 2007 and even 31x in March 2000.

Technically Speaking...

JCI kick-started the week with a whimper as JCI gyrated within a thin range of 4,346 and 4,316.

Support is seen at 4,284, for when this support line is broken, the way lower will be re-opened and we will risk another fall towards 4,133 en route to 3,837.

The fall on Friday was accompanied by a jump in volume, not a good sign for the bulls. However, the RSI has started to curl up, forming a potential failure swing, which could spell rebound.

Overall, worsening technical outlook exposes the index to more weakness throughout the coming week.

Day Ahead

Iran deal will add more positive weight on JCI as such deal could mean cheaper oil prices ahead – hence helping put a cap on the inflationary risk which in turn will hold back Bank Indonesia from pulling the rate trigger again anytime soon. Still, with the Fed’s meeting looms large, a risk of a tapering will keep rallies in check.

Click here to download the full update (PDF)

Morning Dew - November 25th 2013

Beyond 16k

The DJIA has made it to the 16k mark, but what lies ahead? For sure, the Fed’s tapering is on the table and it won’t take a long time until it starts, most likely between February-March. The Fed however, won’t be in a hurry to push up rates as well. Rather, the central bank will prefer to wait for quite some time for the economy to provide stronger life signs before making its move.

With December closing in, there’s a good chance that the upside push is about to continue, given that December is usually a good month for stocks. Hence, a good potential for the Dow translates to a good potential for JCI as well. Even if the JCI lost its correlation with the Dow, positive investors’ mood from abroad could at least limit the downside for JCI.

Housing and Confidence Data

US home sales and housing starts as well as consumer confidence data are set for release the coming week. All are of no critical significance at the moment.

With the fog of war surrounding the Fed’s tapering has somewhat cleared by now, the next big thing on FOMC will be on its December meeting. However, the Committee is seen to maintain its policy and only to make a move at the start of 2014.

Technically Speaking...

JCI ended the week on a weaker footing as DJIA’s ascend to 16k hardly helpful to lift up domestic sentiment. 

Support is seen at 4,284, for when this support line is broken, the way lower will be re-opened and we will risk another fall towards 4,133 en route to 3,837.

The fall on Friday was accompanied by a jump in volume, not a good sign for the bulls. However, the RSI has started to curl up, forming a potential failure swing, which could spell rebound.

Overall, worsening technical outlook exposes the index to more weakness throughout the coming week.

Week Ahead

Policy divergence between Bank Indonesia and the Federal Reserve will loose up some correlation between JCI and the DJIA. While domestic rate hikes are still on the cards this year, the FOMC is expected to stand pat until Fed succession is completed. Poor technical outlook coupled with policy uncertainties will make JCI’s move upside to be laborous instead of a smooth one.

Click here to download the full update (PDF)

Morning Dew - November 18th 2013

Policy Path

Stocks ended the week on a weak footing as Bank Indonesia set out its policy goal to stabilize rupiah. JCI bounced a bit after a narrowing of current account deficit was reported, but ended the week lower anyway even after the next Fed boss Janet Yellen reiterated her support of stimulus policy.

On Wednesday, the market was under heavy pressure after BI raised rates unexpectedly to 7.5%. Three economic variables were seen as the reasons behind the move: current account, rupiah, and inflation. Improved CA position may not be enough to sway BI away from triggering another rate rise as rupiah stays weak against the greenback. 

Retail Sales & Inflation

US retail sales and CPI data for October are to feature on a less data-packed week next week. 

Retail sales are expected to be up 0.1% in October after slightly declined in a month before. Excluding auto, sales are expected to slow from 0.4% to 0.1%.

Consumer inflation however, is seen to have slowed to 1.0% in October from 1.2% seen a month earlier. Excluding volatile food and energy items, CPI is expected to maintain its pace at 1.7%.

Technically Speaking...

JCI rise on Friday was capped at its prior support-turned-resistance at 4,403 and eventually ended on a weaker footing. The technical outlook for JCI remains bleak as the index now hovers below its EMA band, negative MACD, and there’s still no sign of RSI going to rally from the oversold area.

Resistance stays at 4,403 at the moment, followed by the pivotal 4,494 and 4,791.

Support is seen first at 4,284, for when this support line is broken, the way lower will be re-opened and we will risk another fall towards 4,133 en route to 3,837.

Overall, we are still not out of the woods.

Week Ahead

Yellen’s assurance that stimulus will stay and the improving current account position will be the positive catalysts to support the market on the coming week. We should remain cautious that BI has taken its own path down the policy road. If BI deems the rates should go up again, it will make that happen, regardless of what the Fed does.

Click here to download the full update (PDF)

Morning Dew - November 14th 2013

CA Improved

• Stocks widely retreated on Wednesday as the market responded to Tuesday’s move by BI. Finance and property stocks remain vulnerable domestically as these two sectors are considered as rate-sensitive.
• Current account deficit has narrowed in the 3Q13 to $8.4b or 3.8% from GDP compared to prior quarter’s deficit of $9.9b or 4.4% of GDP. According to BI, stronger decline in imports of non-oil and gas outpaced the decline in exports of non-oil and gas, thereby improving the balance between the two. Reduced deficits in both services and income accounts also helped. Current transfers account ended in surplus in 3Q13, better than the reading during the June quarter.
• BI added that the 4Q13 may see this improvement to continue along with the improving global economic and financial conditions.

Eyes on Yellen

• Dow’s decline halted as the market continues to move back and forth over the Fed’s own tapering timing. No key data tends to put the market rudderless for some time.
• Yellen’s testimony on Thursday will attract some attention. Yellen is nominated to replace Ben Bernanke at the Federal Reserve early next year. Her policy is similar to Bernanke and her appointment at the Fed will be seen market friendly, especially in the US.

Technically Speaking...

• JCI crashed through key support at 4,313/14, triggering a bearish zigzag structure which aims at at 4,313 first, which was reached immediately on Wednesday. Next aim is 4,133 as the equivalent wave target, followed by 3,837 as 1.68x Fibo projection target. Curiously enough, the latter was the this year’s low set in August. The smaller zigzag structure aims at 4,286 which was also reached today as JCI set an intraday low at 4,284.03, opening a way to the next one at 4,157.
• Prior supports at 4,313/14 and 4,403 have now turned as resistance.
• Both RSI and Stochastics are hovering around oversold area, while the MACD continued to decline, suggesting the index risks more downside.

Day Ahead

BI rate shocker was a game changer as it underlines its priority on current account deficit reduction and helping the ailing rupiah. As 3Q13 CA showed improvement and the central bank forecast continued improvement in 4Q13, the determinant of another rate hike will be the rupiah. The question is, will improving CA help stabilize rupiah?

Click here to download the full update (PDF)

Morning Dew - November 13th 2013

Rate Surprise

• In another surprise move, Bank Indonesia raised its rates to 7.5% on Tuesday, in a bid to reduce current account deficit, weakening rupiah and easing up inflation. Deposit facility rate was also raised to 5.75% from 5.5%.
• The price that BI has to pay will be in the form of slower growth as borrowing cost rises. Credit and import are also expected to be curbed. At the end of 2Q13, current account deficit was 4.4% of GDP, while the 3Q13 deficit is seen around 3.7% to 3.8% of GDP or $8.4b. This however, lower from $10b recorded in 2Q13.
• GDP itself was up 5.62% in 3Q13, YoY, slower than 5.83% recorded in 2Q13. BI’s forecast GDP for the entire 2013 at 5.5%-5.9% and for 2014 at 5.8%-6.2%.

Eyes on BI

• The Dow fell as profit-taking set in after the index roared to new heights earlier.
• No crucial data is set for release on Wednesday, but the aftermath of BI’s rate move will put more weight on domestic data as no surprises are expected on the Federal Reserve’s side.

Technically Speaking...

• Rate hike brought down JCI to 4,371, cracking the support at 4,403. This triggered the zigzag decline from 4,611.  This zigzag structure aims at 4,365 first, then 4,286 and 4,157 should the next big support and 4,313/14 fails to hold.
• EMA-band now will become the near-term resistance, until the recent high at 4,611 is tested ahead of 4,791 key resistance.
• We are somewhat within a large consolidation range between 4,791-4,313 but with a negative bias as the index is now below its EMA-band. MACD has turned lower again while RSI is approaching the oversold area.
• ADHI hit its stop level, exit at 8.67% losses.

Day Ahead

BI rate shocker was a game changer as it underlines its priority on current account deficit reduction and helping the ailing rupiah. Sectors clearly hit will be finance and property as they fell 2.82% and 2.78%, respectively. As there is no clarity on when the BI can achieve its CA target, these two sectors are likely to be vulnerable for some time.

Click here to download the full update (PDF)

Morning Dew - November 12th 2013

More Doldrums

• Lack of decent economic data is driving the JCI to gains and losses recently. Although the technical outlook looks increasingly negative, there is no critically damaging event nor data from both domestic and overseas to push JCI off the cliff at the moment. 
• Still, the index remains range-bound and with most of the listed companies have delivered their 3Q13 earnings, we’re back searching for new catalysts to move the market.

Fed Watch

• No decent data scheduled makes Fed chatters the next big thing in the horizon. Janet Yellen nomination will be another event to anticipate. Yellen looks set to replace Ben Bernanke early next year as the Fed chairman. Yellen is viewed as stimulus-supporter and her chairmanship is viewed to be stock-friendly.

Technically Speaking...

• JCI took another dive on Monday and set up a somewhat bearish outlook as the index bounced off its resistance at around 4,470. 
• Recent low at 4,403 will be a key-near-term support for the index for if it falls, the prior low at 4,357/58 is likely to be the next target. The next crucial support will be the one at 4,313/14 and followed by 4,207.
• EMA-band now will become the near-term resistance, until the recent high at 4,611 is tested ahead of 4,791 key resistance.
• We are somewhat within a large consolidation range between 4,791-4,313 but with a negative bias as the index is now below its EMA-band. MACD has turned lower again while RSI is approaching the oversold area.
• No changes on the recommendations fow.

Day Ahead

Lack of catalysts will bring back the Fed to the center stage. On Thursday the hearing on the nomination of Janet Yellen  to replace the soon departing Ben Bernanke will take place. There should be no significant hurdle to derail Yellen’s chance to be the next Fed chairman, and this should be positive for the stocks as Yellen is a supporter of Fed stimulus.

Click here to download the full update (PDF)

Morning Dew - November 11th 2013

Back to the Fed

Rudderless

• US Federal Reserve will return into the spotlight as the market digested two key positive data during the recent week. US GDP growth in 3Q13 has not been disappointing after all, having beaten the consensus pretty much. On the other hand, hiring from both private and government remained strong in October, also beating out the consensus.
• These two data brought back the question on whether the US economy will be ready for the stimulus reduction or should it wait a little while longer? Some seem to be viewing the Fed to move before March next year. While some others think that the Fed will make its move some time after March next year.

Payrolls and China

• US payrolls grew 204k in October, sharply higher than the consensus of 120k and also higher than 163k reported last month.
• Inflation in China slightly below consensus, up 3.2% in October, & below-than-consensus of 3.3%. As for industrial production growth, the production was surprisingly robust in September.

Technically Speaking...

• JCI’s outlook remains cloudy as the index stays below its EMA band at 4,470.
• The loss of the EMA support at 4,470 had switched its role back to resistance. Key support now lies at 4,313/4,314, followed by 4,207.
• Outlook turned negative as the price slipped below 4,470 with the MACD continued to push deeper into the negative area. Wednesday’s rise however, was accompanied by a pick-up in volume, a sign that we may see a rebound in Thursday’s session.
• SMRA found its entry price and thus the recommendation has started.

Week Ahead

Lack of catalysts will bring back the Fed to the center stage. On Thursday the hearing on the nomination of Janet Yellen  to replace the soon departing Ben Bernanke will take place. There should be no significant hurdle to derail Yellen’s chance to be the next Fed chairman, and this should be positive for the stocks as Yellen is a supporter of Fed stimulus.

Click here to download the full update (PDF)

Morning Dew - November 7th 2013

Key Points

Rudderless

• Lack of new significant catalysts will steer the market into gains and losses, ahead of the release of the Nonfarm payrolls data for October. Still, reaction could be limited as the data will be somewhat distorted by the impact of the recent government shutdown.
• Individual performance of stocks will find cues from the continued releases of earnings.
• Expectations of Fed tapering seems to be taking a backseat for now. For now, there is no strong case for a tapering to start this year. Most likely after another budget debate early next year.

Awaiting Payrolls

• US leading indicators was up 0.7% in September, better than the expected 0.6% gains.
• US GDP is seen at 2% annualized rate in the 3Q13, against to 2.5% in 2Q13, while nonfarm payrolls data is set to be released on Friday. Consensus calls for an addition of 120k jobs in October after a 148k gains in September. Jobless rate is seen steady at 7.3%.

Technically Speaking...

• JCI’s outlook remains cloudy as the index stays below its EMA band at 4,470.
• The loss of the EMA support at 4,470 had switched its role back to resistance. Key support now lies at 4,313/4,314, followed by 4,207.
• Outlook turned negative as the price slipped below 4,470 with the MACD continued to push deeper into the negative area. Wednesday’s rise however, was accompanied by a pick-up in volume, a sign that we may see a rebound in Thursday’s session.
• SMRA found its entry price and thus the recommendation has started.

Day Ahead

Ahead of the release of nonfarm payrolls data on Friday the market is likely to fluctuate between gains and losses, unless a significant positive catalyst pops out. Domestically, earnings season will continue to set individual path of related stocks. Positive US session hinted for an uptick.

Click here to download the full update (PDF)

Morning Dew - November 6th 2013

Key Points

Ill Omen

• Reduced growth forecast for Europe has weighed on the market sentiment even as the service sector showed improvements in US and China.
• Individual performance of stocks will find cues from the continued releases of earnings.
• Expectations of Fed tapering seems to be taking a backseat for now. For now, there is no strong case for a tapering to start this year. Most likely after another budget debate early next year.

Service Sector Improved

• US ISM index for service sector was reportedly up to 55.4 in the same month from 54.4 a month earlier as well as beating the consensus of 54.0.
• China also saw an uptick in its service sector as reported by HSBC/Markit. The index was up from 52.4 to 52.6.
• Unfortunately, European Union slashed the euro-area growth forecast for 2014 to 1.1% against its prior forecast of 1.2%. Unemployment is expected at 12.2% in 2014, up from 12.1%.  

Technically Speaking...

• JCI slipped back below its EMA band at 4,470, setting a grim outlook for the index.
• The loss of the EMA support at 4,470 had switched its role back to resistance. Key support now lies at 4,313/4,314, followed by 4,207.
• Outlook turned negative as the price slipped below 4,470, MACD continued to push deeper into the negative area despite a diminishing volume spotted.
• We have added SMRA into the recommendation pool. The stock aims at 1,250 while risking a drop below 880. Entry area is set around 1,010-1,030.

Day Ahead

Unfavorable US session pointed at more downside on Wednesday. Ahead of the release of nonfarm payrolls data on Friday the market is likely to drift lower unless a significant positive catalyst pops out. Domestically, earnings season will continue to set individual path of related stocks.

Click here to download the full update (PDF)

Morning Dew - November 4th 2013

Key Points

Ill Omen

• Lack of positive catalysts have taken toll on JCI as the index slipped through one of key support areas. This cast an ill omen for the coming week as technically the outlook has turned negative.
• Individual performance of stocks will find cues from the continued releases of earnings.
• Expectations of Fed tapering seems to be taking a backseat for now. For now, there is no strong case for a tapering to start this year. Most likely after another budget debate early next year.

Manufacturing Improved

• China’s manufacturing PMI ticked up in October to 51.4, up from 51.1 in September, better than the expected 51.2; meanwhile measure from HSBC/Markit also showed improvement, from 50.2 to 50.9, better than the consensus of 50.7.
• Similarly, US ISM index for manufacturing also inched higher from 56.2 to 56.4, better than the expected 55.0.
 

Technically Speaking...

• JCI slipped back below its EMA band at 4,470, setting a grim outlook for the coming week.
• The loss of the EMA support at 4,470 had switched its role back to resistance. Key support now lies at 4,313/4,314, followed by 4,207.
• Outlook turned negative as the price slipped below 4,470, while the MACD has slipped below the zero line.
• No changes in the pool of recommendations for now. All are on hold.

Week Ahead

The delayed non-farm payrolls for October is set to be released next Friday. The reading may receive a mixed response as the data maybe skewed by the effect of recent shutdown. Domestically, earnings season will continue to set individual path of related stocks.

Click here to download the full update (PDF)