Algo Buy Signal – NCM
Our Algo Engine is flagging NCM within the current higher low price structure.
ANZ – 1H17 Earnings
ANZ reported cash earnings of $3.41b and a dividend of $0.80 was in line with expectations.
Revenue was weaker than consensus estimates as net interest margins disappointed.
RBA Preview: Aussie Dollar Still Trending Lower
The Reserve Bank is expected to keep the official cash rate unchanged tomorrow, ahead of the federal government’s budget next week. Over the weekend, fresh concerns emerged that China’s economic recovery might not be as strong as expected, which may also be included in the RBA’s statement.
The consensus is that the 1.5 per cent benchmark interest rate will remain on hold, but some analysts believe it could be raised in the next few months with the domestic economy more resilient than expected.
However, renewed signs appeared yesterday that China’s economic growth trajectory could prove more volatile in 2017 than first thought after a surprising fall in manufacturing output.
It’s our base case that the RBA still maintains an easing-bias, and that the next move on rates will be lower. As such, we expect to see a protracted move lower in the AUD/USD, with a medium-term target near the January low of .7150.
We have suggested that investors looking to profit from a lower AUD/USD can buy the BetaShare YANK ETF. This an an inverse ETF, with a 2.5% weighting, which gains value as the AUD/USD trades lower.
The Next Recession – US March GDP
The next recession will be difficult for Central Banks as already low interest rates, inflated balance sheets & high deficits will likely result in a diminishing effect of policy tools to fight off deflation.
Economy
US GDP has slipped from 2.5% to 0.7% in the March quarter. A long way from the 3.5 or 4% the Trump administration says is achievable. More worrying is GDP appears to be trending lower and now showing only 0.2% growth. The March employment numbers were unexpectedly low, auto sales are dropping due to rising defaults and lenders tightening lending standards. Student loan defaults are rising and mortgage applications are no longer growing.
Many market commentators are dismissing the negative GDP trend as “seasonal issues” and are forecasting a sharp rebound in the June numbers. We’re not so sure and continue to feel that risk assets will soon come under pressure & portfolios should be defensively positioned.
Markets
The bulls will say, yeah but that doesn’t matter, stock prices are rising S&P500 earnings are growing at an average rate of 6%, (ex-energy), and 11% including the rebound in energy related profits, as oil prices recover from this time last year.
Technology giants Microsoft, Google, Apple, Facebook & Amazon are all delivering tremendous earnings growth and this can’t be denied, however, we’ve seen these names suffer during past recessions. They’re not infallible
Conclusion
With the bulk of the S&P500 delivering minimal top line revenue growth, PE’s expanding in a backdrop of falling GDP and rising bad debts, we feel caution is justified.
Local ASX Instruments to consider BEAR, BBOZ, YANK, BBUS & GOLD ETF’s along with Index XJO Puts . Overweight, healthcare, consumer staples, technology & yield sensitive names.
Chart – US GDP Trend
IAG – Algo Buy Signal
We continue to hold IAG as a preferred position following the Algo Engine buy signal triggered on the 31st of January at $5.70. The stock is now trading $6.20.
XJO – Chart Update
ALGO Signal Update: Take Profits In ANZ
The ALGO engine gave a buy signal for ANZ on February 7th at $28.80. During yesterday’s session, the stock traded up to $32.85; within 20 cents of the $33.03 high posted on August 4th, 2015.
Looking back at that price action, after ANZ traded over $33.00 in August of 2015, the share price fell to $26.40 during the next three weeks.
That type of sell off is not our based case. However, with almost a $4.00 profit since the ALGO buy signal at $28.80, investors may want to consider taking profits or write covered calls on ANZ above $33.25.
The ALGO engine has given many profitable signals in the market, in general, and in the banking sector, specifically. We will look for the next buy signal to enter ANZ on the long side again.
Based on internal momentum indicators, $30.00 is the initial level of price support.
ANZ
Algo Engine – Open Buy Signals
Below is a list of the current ASX top 50 stocks that have open buy signals from our ALGO engine.
Some of these trends are maturing and are in the latter stages of their price expansion. However, taking the time to look through the charts and overlaying the ALGO Engine signals will be a worthwhile exercise.
TWE, WES, WOW, ALL, ANZ, ASX, AZJ, BHP, CSL, DXS, FMG
GMG, IAG, JHX, MQG, NAB, ORG, ORI, RIO,S32, SCG, SGP & SHL.
If your access to the charts and signals has expired, please contact me leon@investorsignals.com
Algo Engine – Preliminary Research
We have contracted a third-party firm to conduct a study on the ALGO Engine signals and trading model performance.
The preliminary results have supported my assumptions made by following 18 years of practical experience in the markets. The methodologies developed are now being integrated into a model using the following technical principles.
Our Algo Engine is capturing higher low buy points in individual stocks which make up the ASX top 50 index. When the XJO itself is making “higher highs” and “higher lows”, this produces a very high success rate.
Buying into these patterns can keep investors exposed to major bullish momentum without the human emotion of prematurely taking profits on the trade, and importantly, automating the stop-loss when the upward price momentum begins to reverse.
The chart below shows the performance of the “long only” ALGO Engine signals. The model is based on buying $50k in all long signals and holding the long position until a subsequent short or sell signal is triggered.
An example of this logic is also displayed on the individual stock sample below using Amcor.
For a comprehensive copy of our preliminary research paper, please contact me on leon@investorsignals.com
Take Profits In Suncorp
The ALGO engine gave us a buy signal on Suncorp on January 23rd at $12.92. Yesterday, the ALGO engine generated a sell signal at $13.77.
We suggest that investors who took advantage of the buy signal use this recent price increase to take profits or write covered calls above $14.00.
Technically, the $14.00 level has proved stiff resistance dating back to January of 2015.
Furthermore, the ALGO engine has generated exceptional signals for capturing the medium-term trading ranges for Suncorp.
Suncorp
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