US Debt Crisis Averted………Until December

Posted on | by Todd | Leave a Comment on US Debt Crisis Averted………Until December

US Stock indexes may have dodged a bullet today when President Trump defied his White House advisors and sided with Democrats to defer the debt ceiling debate until December.

Using the legal structure of a “continued resolution” linked to emergency aid to victims of hurricane Harvey, the proposal would suspend the borrowing cap, currently at $19.9 trillion, until December 15th.

And while this manoeuvre calmed the nerves of T-Bill investors into the October maturity, the fear premium of a government shutdown has just been transferred to the December maturity.

Over the next few days we expect to hear more about how this political tactic will impact the administration’s legislative goals on tax reform, infrastructure programs and border security.

The prime risk to US equity markets is that credit agencies view this failure to address the debt ceiling as cause to downgrade US Sovereign debt ratings.

In short, “kicking the can” down the road has not made US assets less risky at current levels.

December T-Bill Yields

 

 

 

ALGO UPDATE: Buy Signal In SHL

Posted on | by Todd | Leave a Comment on ALGO UPDATE: Buy Signal In SHL

On August 16th, shares of Sonic Health care posted an intra-day high of $23.76.

The next day the company announced that NPAT fell 5% to $427 million, which was the worst component  of a reasonably good earnings report.

Our ALGO engine triggered a buy signal on SHL on Tuesday at $21.46.

We consider SHL a defensive stock, which has been oversold, and has now found good buying support in the $21.40 area.

Investors with a medium-term outlook can look to buy SHL with an initial target of $22.35 and a $21.20 stop.

Sonic Healthcare

 

ALGO Update: Sell Signal In STO

Posted on | by Todd | Leave a Comment on ALGO Update: Sell Signal In STO

Our ALGO engine triggered a sell signal for Santos into the close of trade yesterday at $3.81.

Recently, Santos reported solid earnings growth and have paid down a higher percentage of debt than the market expected earlier in the year.

In addition, the current rebound in Crude Oil prices has been a factor in the stock rising from $3.25 to $3.80 over the last two weeks.

With the US refineries based in Houston still preparing to come back online, and hurricane Irma now targeting Southern Florida, Santos shares  could could firm into the the $4.00 resistance level, near-term.

Over a longer time-frame, we expect both Crude Oil prices and shares of Santos to trade lower.

We will watch these two markets closely and give specific trade levels once a clear trade signal emerges.

Santos

 

Take Profits In Newcrest Mining

Posted on | by Todd | Leave a Comment on Take Profits In Newcrest Mining

On August 8th, Spot Gold posted a low during the New York session of $1254.00.

Overnight, the yellow metal posted a 10-month high of $1341.00, a 7% gain in less than a month.

Over the same period of time, Newcrest mining has rallied from $20.25 to post a high of $23.70 early in yesterday’s session. This move represents a bit less than a 17% gain.

Even though the heighten geopolitical tensions which have supported the Gold price are still very much a part of the market, technical momentum indicators are signalling that investors can expect a short-term correction lower.

We believe the medium-term price trajectory in Gold will remain intact after the overbought conditions are alleviated.

As such, we suggest taking profits today in NCM, along with the smaller Gold miners: EVN, SAR, NST and OGC.

Newcrest

RBA Meeting Highlights A Busy Data Week

Posted on | by Todd | Leave a Comment on RBA Meeting Highlights A Busy Data Week

It’s going to be a busy data week for the Aussie Dollar, which could lead to some increased trade activity in the AUD/USD. 

The schedule includes the RBA and Current Account data on Tuesday, followed by the quarterly GDP data on Wednesday, and then the Retail Sales and Trade Balance report on Thursday.

Any of these reports could put further downside pressure on the Aussie Dollar and return the pair below the .7800 level for the week

Investors looking to profit from the AUD/USD trading lower can look to buy the BetaShare ETF with the symbol: YANK.

YANK is an inverse ETF, which means the unit price increases as the price of the AUD/USD decreases.

YANK also has a 2.5% weighting, which means a 1% change in the AUD/USD will correspond to a 2.5% move in the unit price.

The current price of YANK is $12.70.

We calculate that when the AUD/USD trades back to the January low near .7300, the unit price will trade at $16.75.

BetaShare ETF Yank

 

Gold Jumps Higher On Heighten Tensions Over North Korea

Posted on | by Todd | Leave a Comment on Gold Jumps Higher On Heighten Tensions Over North Korea

Spot Gold has started the week close to a 10-month high of $1338.00 as North Korea’s test of a hydrogen bomb triggered the usual shift to safe haven assets, while stock futures are pointing to a lower day for global equities.

Local Gold stocks have opened higher with Newcrest posting a 4-month high of $23.78 in early trade.

With the US markets closed for Labor Day holiday, we could see some consolidation as technical levels now seem stretched.

Over the medium-term, we expect both the price of spot Gold and the local mining stocks to continue with an upward trajectory.

However, we do see near-term scope for a technical pullback in Newcrest to the $23.20 level, and to the $2.38 level in Evolution Mining.

Newcrest

Evolution Mining

 

US Jobs Outlook Weakens, Debt Ceiling Concerns Continue To Grow

Posted on | by Todd | Leave a Comment on US Jobs Outlook Weakens, Debt Ceiling Concerns Continue To Grow

There were no bright spots in yesterday’s US Payroll report.

The 156,000 growth in jobs disappointed and is well below the recent averages. The back two months were revised lower by a total of 41,000 jobs.

The unemployment rate ticked up to 4.4% even though the participation rate was unchanged at 62.9%. Weekly average earnings fell from .2% to .1%.

This was enough to lift US Stock Indexes higher into the weekend.

The NASDAQ had it’s best week since December 2016, finishing 2.75% higher, and the S&P 500 rose 1.5% for its best weekly performance in 4 months.

However, as illustrated in the chart below, the shortest end of the Treasury curve remains troubled as the debt ceiling panic continues to build.

And while the US 10-yr yields rose modestly to 2.16% after the payroll data, the T-Bill yield dislocation has extended out to 32 .25 basis points.

This  indicates that the market remains extremely nervous about a debt ceiling crisis over the next month, which is not bullish for US equities. 

September 21st versus October 5th T-Bill yield spread