Morning Dew - October 28th 2013

Key Points

Doldrums

• Market continues to move back and forth between gains and losses as fresh catalysts remain absent. At the moment the gains and losses hinge on the Fed speculation over tapering and the impacts from releases of several not-so-significant-data.
• Domestically, earnings season will be stealing the market attention in the absence of key global issues and data.

Confidence Slipped in October

• Consumer confidence fell in October from 77.5 to 73.2, a 10-month low, below the consensus of 75 and lower than its preliminary reading of 75.2.
• US durable goods orders climbed 3.7% in September, beating the consensus of a 2.3% rise and way faster than prior month’s slight gains of 0.2%. Excluding transportation items however, the orders fell 0.1%, better than prior period’s decline of 0.4% but sharply below the expected rise of 0.5%.

Technically Speaking...

• Despite declining on Friday, JCI managed to eke out an 0.8% gains throughout the week. The index however, remains resilient above its daily and weekly EMA bands.
• Recent high at 4,609 will act as near-term resistance, followed by 4,791 and 4,900 while the nearest support will be at the upper end of the EMA band at 4,550, followed by recent low at 4,499. 
• Daily indicators hinted at exhaustion as volume slipped along with declining MACD and RSI. On the weekly basis however, the volume has started to tick up, while MACD’s ascend accelerated. Overall, the outlook for the coming week is cautiously positive.
• No changes in the pool of recommendations for now. All are on hold.

Week Ahead

Falling consumer confidence added more relief on the investors’ mind that the Fed will not taper the stimulus soon. Technically, JCI remains positive, but as positive catalysts look limited, the climb will be a grind rather than a rally. Earnings season domestic and overseas will also continue to feature in the coming week.

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Morning Dew - October 25th 2013

Key Points

Doldrums

• Market continues to move back and forth between gains and losses as fresh catalysts remain absent. At the moment the gains and losses hinge on the Fed speculation over tapering and the impacts from releases of several not-so-significant-data.
• Domestically, earnings season will be stealing the market attention in the absence of key global issues and data.

Manufacturing Slowed

• US jobless claims came in more than expected at 350k for the week ending Oct 18, while the prior week reading has been revised down to 362k.
• US Preliminary PMI for October was down from 52.8 to 51.1, below consensus of 52.5, contrasting to China’s piece that came in at 50.9, better than the expected 50.4 and up from 50.2.
• Friday will see the US durable goods data for September released. Consensus sees 2% increase after a small 0.1% gains in prior month.

Technically Speaking...

• There is no change in view as the index remains stuck near its EMA support around 4,550.
• Prior high at 4,609 will act as near-term resistance, followed by 4,791 and 4,900 while the nearest support will be at the upper end of the EMA band at 4,550.
• MACD has started to edge higher again, while volume ticked up. Still no significant signal coming from RSI. 
• No changes in the pool of recommendations for now. All are on hold.

Day Ahead

As the market is running out of major catalysts, the sessions ahead will be more likely going sideways. US earnings season continues to be around along with speculation over the start of Fed’s tapering.

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Morning Dew - October 24th 2013

Key Points

Doldrums

• JCI bounced back after it got under fire a day earlier. The bounce could be a part of a large consolidation currently happening as the market is waiting for the next big things such as the FOMC decision, and more rounds of of economic data.
• Next incoming data are from the housing market and the job market. US New Home Sales were expected to gain 1% in September from prior month, compared to MoM jump of 7.9% recorded in August. US jobless claims data is also set for release on Thursday.
• Beyond Thursday, Friday will feature durable goods orders, as well the U. of Michigan confidence index.

UNVR Not Going Private

• UNVR soared to reach as high as 37,350 on Wednesday after a rumor about the company planning to go private hit the market.
• The company clarified the matter as it stated that it is its subsidiary company, Unilever Body Care which was previously listed (PROD) which is going to go private.
• At the end of the day, UNVR settled at 31,700, trimmed its gains to just 2.92%.

Technically Speaking...

• JCI made another push above its EMA resistance and managed to hit 4,609  only to get pushed back to end at 4,546. The candle pattern shows exhaustion and it risks for another attempt to go down. 
• Prior high at 4,609 will act as near-term resistance, followed by 4,791 and 4,900 while the nearest support will be at the upper end of the EMA band at 4,530.
• Indicators show no new hints at the moment. 
• No changes in the pool of recommendations for now. All are on hold.

Day Ahead

As the market is running out of major catalysts, the sessions ahead will be more likely going sideways. US earnings season continues to be around along with speculation over the start of Fed’s tapering.

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Morning Dew - October 23rd 2013

Key Points

Short on Expectations

• Payrolls came short of expectations in September. After an August gains of 193k, September saw only 148k gains in payrolls. Unemployment rate was at 7.2%, which is best reading since November 2008. Payrolls number trailed the consensus of 180k.
• Less than expected payrolls number turned out to be supporting stocks as the Federal Reserve will have to wait for firmer string of data. 
• The next release of payrolls data has been pushed back to Nov 8 from the originally scheduled Nov 1 as a result of recent shutdown. Meanwhile, the FOMC will hold its meeting on Oct 29-30, but the market is now factoring in Fed’s tapering to start on March 18-19 next year instead.

US Earnings Update

• So far, 138 companies have reported an average growth of 5.5% in earnings while sales have been reported growing by 2.3%.
• Of these companies, 72% managed to beat consensus  in terms of profit while 54% have beaten sales estimates.
• While the Dow claws its way up, the wider S&P 500 index is closing in to its best annual gain in a decade to 1,754.67 (+0.6%).

Technically Speaking...

• JCI slipped back to end inside the EMA band on Tuesday, hitting the intraday low at 4,499.  The index was nowhere near its Monday’s high at 4,585, hence putting its move towards 4,791 (Sept. high) en route to 4,900 on hold for now.
• Prior high at 4,585 remains as resistance, followed by 4,791 and 4,900 while the nearest support will be at the lower end of the EMA band at 4,444.
• Indicators took a u-turn as volume slipped, MACD ticked down while RSI turned lower after it approached 70% area earlier, the area considered to be overbought. 
• ADHI and ROTI were filled, which means now there are seven active recos.

Day Ahead

Less impressive NFP figure turned to be a positive catalyst as the FOMC will have to wait for more convincing string of jobs data before considering to start removing its stimulus. JCI is expected to bounce off its yesterday’s low this Wednesday. 

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Morning Dew - October 22nd 2013

Key Points

Eyes on Payrolls

• The next big thing in the market will be the release of the delayed non-farm payrolls data. No distorted data is expected for the September period, but the October data also set to be released soon will be distorted by the effects of US government shutdown.
• September payrolls data is expected to show an addition of 180k workers during that period, compared to 169k added in August. 
• Late receipts of key data are seen holding the Federal Reserve back on their anticipated tapering of stimulus. A move in October is now highly unlikely as the Fed will not want to decide over a distorted data set. If it’s three months of normal data to be based on, it points at February, but budget fight will be replayed by that time so it looks like no tapering to happen this year. More likely will be a quarter or two after Janet Yellen succeeds Ben Bernanke as the Fed chief. 

US Earnings Season

• Profits are forecast to increase on an average of 2.5% for all companies in the S&P 500, up from 1.7% gains expected earlier this month.
• So far, for 108 companies that have reported their earnings, the average gains in earnings is 4.5% while sales at 2.1%.
• From these 108 companies, 70% managed to beat profit forecasts while 54% have exceeded sales expectations.

Technically Speaking...

• JCI continued to march above its 100-and-200-day-EMA as it aims towards 4,900. Before that however, the index is about to face its prior high resistance at 4,791 (Sept 19th).
• Prior EMA resistance has now turned as support and so the nearest support will be at 4,520, followed by the lower end of the EMA band at 4,444.
• Positive outlook maintained by the indicators as volume continued to rise, MACD still ticked up while RSI has been flattening as it approaches 70%, the area considered to be overbought. 
• ADHI and ROTI are still waiting on the sidelines for their fillings.

Day Ahead

Simply all about fundamentals and earnings, with a little bit of Fed’s guessing game. Fundamentals on the release of nonfarm payrolls data, and earnings releases from S&P 500 companies in the U.S.

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Morning Dew - October 21st 2013

Key Points

The Guessing Game

• As the political drama in Washington came to an end, attention will be shifted towards the guessing game over when the Federal Reserve will start tapering the monetary stimulus.
• Another issue to face will be the earnings season in the US and some domestically. As earnings mostly concern with individual corporate performances, the impact will be most likely limited.
• FOMC’s move in October is rather unlikely at the moment. That is, if they stick to their own words that their decision will be data-dependent. So far, September payroll data has yet to be released while October data is bound to get distorted by the impact of shutdown. A move in December may also be too close to the end of Bernanke’s terms at the Fed whereas January and February may be too close to another budget fight. This situation will keep investors guessing for when the tapering will start.

China’s 3Q Growth Rebounded

• 3Q13 GDP grew 7.8% vs. 3Q12 after hitting 7.5% in 2Q13, in line with consensus.
• Growth may owe itself to boost in government spending as consistency is questioned.
• Retail sales grew faster in September at 13.3% (YoY) vs. 13.4% in August, industrial production also slowed from 10.4% in August (YoY) to 10.2%. 

Technically Speaking...

• JCI managed to end the week above its key EMA resistance, hence the outlook brightened as a move towards 4,900 is expected. Before that however, the index is about to face its prior high resistance at 4,791 (Sept 19th).
• Prior EMA resistance has now turned as support and so the nearest support will be at 4,520, followed by the lower end of the EMA band at 4,444.
• Friday’s rise was accompanied by rising volume as well as MACD inching higher. RSI has climbed pretty fast approaching 70%. Overall, the outlook based on these indicators has once again turned positive.
• ADHI and ROTI have been added to the pool of recommended trades. Please see the table below for the details of the setups.

Week Ahead

As the dust from budget impasse has been cleared, the market will be re-focusing itself towards fundamentals and the Fed. Earnings season in the U.S. will influence individual stocks. Domestically, some companies will start reporting as well. One of high profile releases next week will be the delayed nonfarm payrolls which is due in Tuesday. Monday however, US existing home sales for September is set for release.

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Morning Dew - October 18th 2013

Key Points

Business, as Usual

• US borrowing authority is extended until Feb 7th. Until then, the Treasury Dept. will keep using its ‘extraordinary measures’ to avoid default should the Congress does not raise the debt ceiling by that date.
• Federal spending at current levels are set to be extended until Jan 15th. Sequestration / across-the-board cuts are maintained.
• House-Senate panel to be formed to try reducing long-term-deficit that could be approved by the full Congress. The panel will have to complete this by Dec 13th. Given the great divide between House and Senate, such result is bound to be elusive.
• Measures to attempt to prevent federal subsidies from being paid are established. The targets are the people whose incomes are eligible.
• Furloughed federal workers’ wages during the shutdown will be receiving back pay.

Earnings and the Fed

• As the political drama came to an end (for now), the market will shift its attention back to the Federal Reserve as well as the ongoing earnings season.
• Dow’s weakness came as Goldman Sachs and IBM delivered results which came in below the expectations.  On the contrary,  S&P index surged to record highs.
• Debt impasse is seen to put Fed’s tapering on hold.

Technically Speaking...

• JCI is still struggling to break through the EMA resistance at around 4,530. Despite it managed to set an intraday high at 4,550.54 during the Thursday session, the gains failed to hold and it trimmed its gains to settle at 4,518.93. A successful break however, will open up a way towards 4,900 price objective.
• Support is nearest at 4,425, around the 50-day EMA, followed by 4,357/58 (double-bottom support) and a more crucial one at 4,313/14 (double-bottom). If we sink below 4,313/14, we risk another bearish round towards 4,207.
• Resistance will be at 4,550 (Thursday high), followed by 4,792 (Sept high). Beyond the latter we may see 4,900.
• Dow might be weak, but S&P index has scored another record high. It is likely that the index will attempt once more in breaking through the resistances and reaches its price objective at 4,900.
• MDLN also managed to meet its price objective at 850. The reco has been removed from the pool with gains of 25% (see the table below for details).

Day Ahead

As the shutdown issue has been set aside for now, the market will return to fundamentals and earnings. JCI is seen mixed with positive bias. Last day of the week may cap volume.

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