JHX reported FY17 results that were below market expectations. EBIT
of US$354m & NPAT of US$249m
At 27x earnings and a 2.6% dividend yield, combined with last week’s deteriorating new home sales data in the US, JHX has been one of our high conviction shorting opportunities.
Chart – JHX
Goldman Sachs has sold off $40 since the high created on the 1st of March. The chart image below shows price action is now finding minor support within a weakening short-term channel.
We’ll continue to watch the chart pattern unfold with anticipated resistance back up at $230.
The relevance of tracking GS for local investors, is it may provide an indication as to when our local banking & finance stocks will find new selling pressure, should they have a minor bounce from yesterday’s lows.
The IVV is an iShares ASX listed ETF that provides exposure to the S&P500 index of stocks.
Our Algo Engine has triggered multiple buy signals over the past 3 years and so far, no sell signals. However, with the index at 18x earnings and deteriorating global economic data, we feel now is an opportunity to lock-in gains and wait for the next Algo Engine buy signal.
The US 10 YR treasuries have fallen from 2.62% yield, to now trading at 2.23%. US economic data is deteriorating and the bond market is suggesting that a June rate hike is now less probable.
Lower bond yields make it more difficult for banks to expand their net interest margins.
The following graphs show the recent trends in GE and Goldman Sachs. We’ve been following GE since January as a leading indicator of the headwinds facing global industrial companies. We’re now seeing this weakness manifest in the beginning of a more broad based equity market sell-off.
The Dow Jones Index has broken the first support level at 20,800 and the next level will be 20,380.
Following the recent Algo Engine buy signal in OOO.AXW, the ETF has now rallied over 10% from the $12.74 low formed on the 5th of May.
The XJO is now consolidating within a trading range of 5790 as support and 5950 resistance.
The Dow Jones index is now trending back towards retesting the high set on March 1st at 21,169.
We remain cautious based on stretched market valuations and a reversal in the index back below 20,798 will be negative.
After the strong rally in SGP, LLC, GPT and MGR, the price action looks to be rolling over, pointing lower, and we’ll watch these names closely. SGP appears to be showing the most selling pressure with the current price action taking out the 4.74 low formed on the 26th of April.
Our Algo Engine generated a buy signal on MVA.AXW (Vaneck Vectors Australian Property ETF) back in November at around $18.40, the ETF traded up to $21.30 and in the last week it’s starting to run into selling pressure.
The current sell-off in TCL will soon offer a reasonable entry level.
With US yields remaining under pressure, we continue to like yield sensitive names. Especially, if we can pick them up at a discount following investors taking profit from the recent strong rally.
The chart below shows the value range to enter TCL.
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