Suncorp Group is under Algo Engine sell conditions following a lower high formation at $13.50.
We see reduced scope for Suncorp to reprice mortgages, given the
current political and regulatory climate, and we expect to see ongoing margin
pressure.
Stay on the short side and watch for the share price to trend lower with the 10 day average crossing below the 50 day average as a reference point.
Boeing is under Algo Engine sell conditions and with the current pressure on the share price, we expect to see a new higher low form. When the pattern is in place, we’ll update you on the timing of the switch to buy conditions.
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Disclaimer: The table illustrates the simulated 5 year historical time weighted rate of return of applying our algorithm based investment model over the ASX100 & US S&P100 listed securities.
Boral, James Hardie Industries and CSR have rallied from oversold levels, as buyers have been attracted to the reduced PE multiples. The question is whether non-residential and engineering construction will offset the fall in residential construction volumes.
Australian housing approvals have been trending down for the past 6 months with Jan approvals of 172k, down 30% on the same time last year.
BLD, JHX and CSR are now under Algo Engine sell conditions and we remain cautious given the broader market index back drop.
We consider Boral as the best recovery opportunity, but expect short-term sell pressure to persist.
Newcrest Mining will pay US$807m to Canadian listed Imperial Metals for the proposed acquisition of 70% of the Red Chris mine.
The opportunity provides for operational improvements and possible long-term exploration upside.
We continue to view Newcrest as expensive and prefer Evolution Mining, OceanaGold and Northern Star Resources as our gold exposure.
Our Algo Engine has Computershare under current sell conditions. The stock is now trading on a stretched PE multiple and sub 3% dividend yield.
We expect the share price to remain below the $18 sell signal level.
Gold has sold off in recent trading sessions, following the strength in the US dollar. The sell off has now created Algo Engine buy conditions in Evolution Mining, St Barbara, OceanaGold & Northern Star Resources, all of which are current holdings in the ASX 100 model.
Newcrest Mining is still in the early stages of forming a higher low and may take another few days before we see an Algo Engine buy signal appear.
OZ Minerals was removed from our ASX100 model late last year after generating 144% return.
The stock is now under algo sell conditions.
OZL reported FY18 earnings that beat consensus with NPAT of A$228m. Dividends were lifted to $0.15
We’re buyers of OZL on the next algo engine buy signal. We will remain patient as the general price backdrop for resources is over extended in the short-term.
Global markets are in the early stages of rolling over, as a combination of weaker data from China, Europe and the US weighs on investor confidence.
The U.S. economy added just 20,000 jobs last month, marking the weakest month of job creation since September 2017. Economists polled by Dow Jones expected a gain of 180,000.
Data out of China showed its exports slumped 20.7 percent from a year earlier, far below analyst expectations and wiping out a surprise jump in January.
The European Central Bank slashed its growth forecasts for the euro zone and announced a new round of policy stimulus.
As readers will be aware, we’ve been tracking the XJO to break the 10 day moving average as a confirmation of the short-term indicators supporting the longer-term Algo Engine “sell” signal. If we apply the same analysis to the Dow Jones, we see a more advanced break in price action.
US equities continue to remain at a significant P/E premium to the rest of the world despite no longer having an earnings growth advantage. 2019 EPS growth estimates for the S&P500 are now at 4%, down from 12% 6 months ago. Technical indicators look stretched once again, and we’re back at levels where selling pressure will build for most major US indices.
High PE growth names still require considerable investor caution, whereas, yield sensitive areas are likely to remain well supported, even if market volatility pickups again in the coming weeks or months.
At a global level, value in China, India & Brazil, along with ongoing liquidity from Japan, will add some level of support. China has been aggressively easing monetary policy and cutting taxes for more than six months, as an offset to their crackdown on excessive credit growth last year and headwinds from US tariffs. We think there could be more stimulus from China forthcoming.
Emerging market growth goes from +3% in 2018 to +7% in 2019, in contrast S&P500 EPS growth drops from +23% in 2018 to just +4% in 2019.
ASX 200 headline PE has reverted towards its long run average of 14x earnings, the Australian equity markets are likely to run into selling pressure with the XJO at 6100 points. This is due to limited earnings growth and the extended rally in resources.
In today’s ASX Top 50 Market Update Video Report, we analyse the ASX top 50 stocks and identify the names we’re currently holding in the model and those that are likely to underperform following weak earnings announcements.
Lendlease released 1H19 earnings last week and the initial reaction from the market has been negative, with the share price moving lower.
The company indicated the Australian Engineering business is non-core, which suggests we will soon see a trade sale of some description.
In FY20 we see a normalization of the Lendlease business, following the cost overruns in the FY19 results. FY20 we see revenue at $13bn and EBIT at $1.2bn.
FY20 yield is running at 4.8%. Value is emerging, watch the shot-term indicators for a positive reversal.
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