Yellen, Refreshed
In her recent speech, the Fed chair Janet Yellen “refreshed” her take on the US monetary policy, Her recent comment (on March 19th) that the Fed may rise its benchmark interest rate about six months after the tapering process ends had made sparked some selloffs across the global stock markets.
All the market should think about is the gap between the Fed’s goals and actual figures of unemployment and inflation rates. Currently, the unemployment rate is at 6.7%, much higher than the Fed’s estimate for full employment of 5.2 to 5.6%. Inflation rate on the other hand, is now well below the 2% target set by the Fed. In other words, Yellen indirectly replaced the 6.5% scrapped target unemployment rate with 5.2 to 5.6% full employment estimate.
Both American and European stock indexes cheered Yellen’s speech and Asian stocks are most likely be doing the same.
GDP Slowed, Again.
China’s GDP slowed to 7.4% in the first quarter of 2014 vs. a year earlier. While the figure was better than the consensus 7.3%, the growth rate was behind the 7.7% seen in 4Q13. From prior quarter, the GDP grew 1.4%, less than the consensus estimate of 1.5% growth and also slower than prior quarter-to-quarter growth of 1.7% seen in 4Q13.
China’s industrial production grew 8.7% (YoY) during the first 3 months in 2014, while in March alone production grew 8.8% (YoY).
Technically Speaking...
It’s going to be another make-or-break moment for JCI as the index inched higher on Wednesday, closing in to the key resistance at 4,933.
Failure to follow-through its recent gains has formed a potentially bearish star pattern on the daily JCI chart, a traditionally sign of trouble. We had exactly the same pattern when the index took a sharp dive from 4,933 last week.
The nearest resistance is seen at 4,933, the recent intraday high ahead of 5,000 which is the psychological resistance and subsequently the projection target at 5,063.
Key support lies at 4,661 which corresponds to the 50-day EMA curve.
Volume slipped on Wednesday, but the MACD continued to return to above the zero line while the RSI curve curled lower again.
Day Ahead
China slowdown sapped JCI’s gains on Wednesday, but Yellen’s speech overnight is likely to boost sentiment this Thursday and lead the JCI back higher. Risk factors remain however, as political uncertainties still abound, along with potential trouble coming out of Ukraine. As Thursday will be the last trading day for JCI this week, investors may be taking a cautious path even amidst Yellen’s positive speech.
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