Morning Dew - 8 January 2014

Taken Hostage

JCI remained under pressure on Tuesday, sinking deeper towards 4,175.

Uncertainties over the implementation of mineral ore ban has taken the miners stocks hostage. The law is set to apply by January 12th 2014 but the government stays silent on whether there will be any intervention to revise it.

From the global front, the slowdown of service sectors in both US and China has hurt sentiment as well. Still, this is viewed as temporary as US should maintain its course on tapering while China is still seen posting decent economic performance.

IDR continues to be a source of concern as the currency continues to fall.

US Trimmed Deficit

In a rare occasion, US trade deficit has shrunk significantly in November. Initially forecast to be at –$40bn, the reading came in at -$34.3bn, compared to October’s data of -$39.3bn.

Sharp drop in oil imports was behind the reduction of deficit. US has become more domestically dependent on oil production, hence reducing its dependence on overseas producers.

Demand for foreign cars, parts and capital goods however, remain strong. Exports on the other hand, have been strong as well

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 three sessions while MACD continues to tick down. RSI has returned to its mid-point around 50%, opening room for the next leg up.

Near-term support is at 4,154, with near-term resistance is seen at 4,212.

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.

Day Ahead

JCI is seen consolidating further within the confines of 4,100-4,300 trading range on Wednesday. With the miners remain vulnerable over the uncertainties of mineral ore export ban, upside is seen limited. IDR is also a negative for the index as the weaker it gets, the higher the odds for another rate hike to stabilize the currency.

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