Algo Buy Signal – Gold
With recent Algo Engine buy signals in NCM and GDX (Gold ETF) we look to add exposure to client accounts across leading names within the sector.
USD Sinks On Mnuchin Comments
Over the last 4 years, the ability of G-10 Central bankers to drive financial markets has risen to historic levels.
A perfect illustration of this dynamic was yestrday’s sharp sell-off in the USD after comments from US Treasury Secretary Steven Mnuchin at the World Economic Forum in Davos.
The USD Index fell over 1% and posted a 3-year low after Mr Mnuchin said:
“A weaker dollar is good for us as it relates to trade and opportunities. Longer term, the strength of the dollar is a reflection of the strength of the US economy and that it is, and will continue to be, the primary reserve currency.”
It’s important to note that while the Yen, Sterling and EURO were all stronger against the USD, their domestic stock markets were all down over 1% on the day.
A policy meeting for the ECB is scheduled for later today. The EUR/USD has risen over 5% since the last ECB meeting in December.
It’s reasonable to expect ECB chief Mario Draghi to talk the EURO lower, which could mark a significant inflection point for the USD versus the other G-10 currencies, including the AUD.
The AUD/USD has gained more than 7% since mid-December. And while the RBA has not openly commented about the value of the AUD recently, they have been clear in their policy statements that a rising AUD is a “headwind” to domestic growth.
Investors who want to profit from a lower AUD/USD can look to buy the BetaShare YANK ETF. YANK is an inverse ETF with a 2.5% weighting. This means that the share price of YANK will increase by 2.5% for every 1% fall in the AUD/USD.
With the YANK currently priced around $12.20, we estimate the share price to rise to $16.40 when the AUD/USD reaches .7150.
Call in for more information about YANK and the other ASX listed ETFs.
BetaShare ETF: Yank
China Large-Cap ETF – Take Profit
We recommend taking profit in the IZZ China Large-Cap ETF.
Energy Names – Best Buy-Side Opportunities
Within the ASX 50, OSH, STO, WPL, ORG & BHP are the names investors consider when looking for exposure to Oil and LNG.
Currently WPL, ORG and BHP remain in our ASX50 model following a series of structural “higher low” formations.
OSH is not currently in our model portfolio.
The negative we see in the stock relates to market concerns surrounding their stretched balance sheet.
Oil Search has committed to substantial projects in PNG and Alaska and should oil prices fail to hold $60 – $80 per barrel, Oil Search may need to raise capital.
This week, Oil Search reported solid 4Q17 production at the upper end of their guidance range, with revenue of US$389mn.
Our preference remains adding long exposure on any pullback in BHP, WPL & ORG.
We are also watching for the next Algo Engine buy signal in the oil ETF OOO.AXW.
ALGO Buy Signal: Cimic Group
Our ALGO engine triggered a buy signal for CIM at $48.20 into yesterday’s ASX close.
Shares of the infrastructure contractor have dropped over 8.5% since posting an all-time high of $52.70 on December 19th.
With several large developments planned for domestic capitol cities, we see good fundamental support down into the $47.50 area.
Technically, the internal momentum indicators show the most over-sold condition in the last 18 months.
In addition, we point out that the limited share registry in CIM adds value at extreme price levels.
We see initial price resistance at the January 18th high of $49.70.
Cimic Group
QBE Rebounds After Yesterday’s Warning
Despite warning investors about a potential US 1.2 billion full year after tax loss, shares of QBE are over 4% higher at $10.90.
After dropping over 6% to $9.85 yesterday, it seems investors looked past the headlines and saw value in the company going forward.
Much of this optimism was based on the one-off charge of US 230 million on the value of deferred tax credits in the USA and a US 700 million impairment charge.
Our ALGO engine triggered a sell signal in QBE at $11.00 on October 24th.
With the daily chart still dominated by the “lower high” pattern from mid-August, we consider QBE a reasonable stock for a BUY/WRITE strategy.
QBE Insurance
The US Government Is Back Open………….Until February 8th
The US Senate was able to agree on a short-term resolution to allow the Government to reopen until the 8th of February.
The US has not had a properly ratified budget since 2009 and these “stop-gap” agreements are now getting shorter in duration.
The DOW, S&P 500 and the NASDAQ all responded by making new all-time highs.
Interestingly, as illustrated in the charts below, not only are the 2-yr Treasury notes now yielding more than the SP 500 in the last 10 years, but the Index itself is the most overbought in history.
We suggest that the extreme valuations on Wall Street will soften US yields over the medium-term.
As such, we would expect to see buying interest in the ASX yield names such as TCL, SYD and WFD .
Our ALGO engine currently has flagged buy signals in TCL and SYD at $11.70 and $6.80, respectfully.
2-yr versus SP 500 yields
SP 500 Sentiment Oscillator
Origin – Higher Low Pattern Continues
Origin Energy remains in our ASX 50 model portfolio following the Algo Engine buy signal in March 2017 at $6.50.
With the price action creating a another “higher low” formation over the past few trading sessions, short-term traders can consider taking a long position with stop orders below $8.75
Origin Energy
Algo Update – Invocare
Our Algo Engine triggered a recent buy signal in IVC and the stock has continued to drift lower.
The next range of support is $14.30 , followed by the up trending support line marked as “support 2” in the graph below.
The negative price action over recent days is being driven by the market’s reaction to a change in industry competition in the UK and concerns that similar challenges may emerge in Australia.
IVC reports full year earnings result on 19th February.
InvoCare
Regional Banks Continue To Slide Lower
Since posting a intra-day high of $12.05 on January 10th, shares of BEN have dropped over 6% and have slipped to a 2-month low of $11.32 in early trade.
Similarly, shares of BOQ have lost 4.6% since the start of the year and posted a 5-month low of $12.26 last Friday.
Recent mortgage forecasts have illustrated that in an overall loan market which is contracting, the regional banks will face the strongest headwinds to achieving the margins and loan growth that they have created over the last three years.
Our ALGO engine triggered a sell signal for BEN on August 16th at $12.45, and for BOQ at $15.50 on August 7th.
This has been a popular “short” trade for investors on our SAXOGo platform.
We expect the next level of downside support at $11.00 for BEN and $12.05 for BOQ.
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Investor Signals Pty Ltd
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