Morning Dew - 7 January 2014

Gas Relief, Miners Uncertainties

JCI extended its losses on Monday as the index sunk to end near 4,200. This week the new lot size and price fractions rules are started to apply. Given new trading environment, the market may enter a period of adjustment as traders adapt to the new rules.

Good news came from Pertamina as the proposed hike of LPG for 12kg canisters has been revised from earlier hike of IDR3,500 to IDR1,000. The decision is to be effective on Tuesday.

Uncertainties over the implementation of mineral ore ban has put pressure on miners. The law is set to apply by January 12th 2014 unless there’s a government intervention to revise it.

US Service Sector Slowed

ISM service index fell to 53 in December from 53.9, below the consensus number of 54.7. 

ADP employment data is set for release on Wednesday, while FOMC minutes will be released on the same day. Friday will see employment data coming from U.S. as nonfarm payrolls is back into focus. The recent Fed decision to start its tapering was linked to the development in the labor market which makes the data significant to weigh the next move from the Fed.

Technically Speaking...

The fall at the start of the week brought the index back into the middle of its prior consolidation range between 4,100-4,300. 

Volume however, has been light during the last two sessions while MACD continues to tick down. RSI has returned to its mid-point around 50%, opening room for the next leg up.

JCI needs to take on 4,300 convincingly to set up a stronger rally while defending its support area around 4,100.  Slipping below 4,100 may risk another visit towards 4,000 en route to 3,837.  On the upside, another push above 4,300 could revive the index’s chance to return to 4,400.

META is out as the reco got stopped out at 235.

Day Ahead

Sharp drop in commodity sectors such as agri and mining could be attributed to the worsening China’s PMI for service sector reading. The December’s index fell to 50.9 from 52.5. Still, this week JCI may be subdued by the new trading rules, uncertainties over the looming mineral ore ban as well as sinking IDR.

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