Morning Dew - 12 February 2014

Continuing the Legacy

Indonesian stocks went back up on Tuesday as the market awaits the first speech from Janet Yellen, the new Fed chairwoman. 

In her speech, Yellen said indicated that the Fed under her will continue the policy of the Fed previously led by Ben Bernanke. The policy of tapering off the stimulus in “measured steps” will be maintained. Only a “notable change in the outlook”  for the economy can slow the pace of tapering.

Financial market turmoil does not pose a major risk to the US economy outlook while asset purchases aren’t on a “pre-set course”.  As for labor market, the recovery is far from complete, she said.

Unemployment rate recently fell to 6.6%, while the Fed previously stated that the rate is likely to stay near zero until “well past the time” unemployment falls below 6.5%.

Not The Only One

But jobless rate is not the only one to determine policy action as it is not an adequate gauge of labor-market health. The Fed would be looking at a broad range of data, including unemployment, job creation and many other indicators.

On job creation, US nonfarm payrolls itself showed less jobs were added to the economy in January.

Yellen’s remarks were largely matching the expectations. In the end, Yellen is seen leading the Fed to stay on its policy course set during Bernanke’s era.

Technically Speaking...

JCI is closing in to its resistance area as it settled the day at 4,470 after having peaked at 4,475 during Tuesday’s session.

The 200-day EMA at 4,420-4,430 will be the interim support area for now, followed by recent lows at 4,320 and 4,286. Next big support comes at 4,161, followed by 4,109 and 3,837.

Nearest resistance is seen at around 4,480-4,510. Once 4,510 is cleared, 4,592-4,610 will be the next hurdle to crack.

MACD is rising but volume dipped slightly. The index now back above the EMA band, but the continued inability to clear the 4,510 resistance could erode the index’s near-term positive outlook. 

Day Ahead

Yellen’s speech drove the US stocks up with the DJIA gained 1.22% and S&P rose 1.11%.  This suggests that the Wednesday session in Asia is likely to be positive than negative. Meanwhile, domestic stocks will continue to be influenced by the earnings season already started.

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