US Markets – Chart Update

Posted on | by Leon Hinde | Leave a Comment on US Markets – Chart Update

US Stock Indexes closed lower on Friday as option expiration and continued weakness in the financial sector offset gains in the industrial and utility names.

The Financial index finished the day over 1.5% lower with the major banks stocks: JP Morgan, Goldman Sachs, Citi Group and Bank of America all falling by more than 1% by the New York close.

With the SP 500 index now trading at 22 X earnings on a forward yield of just under 2.5%, the medium-term fundamentals don’t appear to support the high level consolidation at these prices.

Technically, the SP 500 index has not closed below the 30-day moving average in over 4 months.

We now see key price support at 2356.00. A break of this level would likely extend back to the February 13th low of 2310.00.

Chart below of Dow Jones Index and S&P500

 

Chart – IVV (S&P500 ETF)
Chart – Dow Jones

 

TABCORP Fined $45 Million

Posted on | by Todd | Leave a Comment on TABCORP Fined $45 Million

Tabcorp has agreed to pay the largest civil penalty in Australian corporate history yesterday, as company officials admitted that they had failed in it’s obligation to strictly follow domestic Anti-money laundering laws.

The gaming company agreed to pay $45 million to the Federal Government and pledged to modify its protocol for management oversight and operational execution of their money laundering program.

We feel the “silver lining” to this story is that the ACCC will take a favorable view of Tabcorp’s admission of oversight and commitment to increasing internal surveillance when ruling on the pending merger with Tatts group.

Shares of the company have traded back to support at $4.50 in early trade. We view Tabcorp as a $5.00 stock in the medium-term and suggest adding to long positions at these levels.

Amcor – Finding Support

Posted on | by Leon Hinde | Leave a Comment on Amcor – Finding Support

Amcor looks like it is finding support at $14.25 and could trade up to $15.00.

With the stock on a  4% forward yield and earnings likely to grow at 4 – 8% p/a we think this makes a AMC a good buy-write strategy.

The August dividend plus the call option income is generating over 10% annualised cash flow, whilst still allowing 5% capital growth over the next 6 months.

Chart – AMC

Bendigo Bank – Algo Buy Signal

Posted on | by Leon Hinde | Leave a Comment on Bendigo Bank – Algo Buy Signal

Our Algo Engine is flagging BEN with a technical buy signal.

We’re mindful of the downward pressure on the banking sector following today’s weak employment data.

Therefore, we’re not buyers at present, but we’ll be watching BEN and looking for the short term indicators to turn positive at or near the $11.00 support level.

Chart – BEN

 

 

 

FED Lifts Rates, Gives Cautious Guidance

Posted on | by Todd | Leave a Comment on FED Lifts Rates, Gives Cautious Guidance

The US Federal Reserve raised the benchmark Fed Funds rate by 25 basis points to a range of .75% to 1%.

The FED’s “Dot Plot” Table of FED members’ projections for short-term interest rates showed three hikes in 2017, three in 2018 and three in 2019, which is unchanged from the prior forecast in December.

While the rate adjustment was expected, the unchanged forward guidance in the dot plots fell short of the street’s expectations. Many analysts’ were looking for a higher rate trajectory into the middle of 2018.

One reason given for the cautious outlook was the sharp fall in GDP growth for Q1 2017.

The Atlanta FED GDPNow tracker has been revised down to .9% from 1.9% in December.

Computershare – Put Option Play

Posted on | by Leon Hinde | Leave a Comment on Computershare – Put Option Play

Computershare looks expensive.

We generally don’t participate on the buy-side when it comes to options on individual stocks.  However, we do buy index options to hedge portfolios or to make profits on short-term corrections.

In the current environment, when some stocks look overvalued, it makes sense to buy put options on a stock specific basis.

Let’s track these over the weeks ahead as a strategy to profit from a pull-back in the share price of CPU.

We buy the $13.75 May Put options for $0.45.

CPU – May Option Prices
Chart – CPU

 

 

China – A stronger start to 2017

Posted on | by Leon Hinde | Leave a Comment on China – A stronger start to 2017

The Chinese government suggests there’ll be  no hard landing. China’s financial system is generally stable and there are no systemic risks.  Adding, that the government has enough policy tools to handle any risks.

China’s fiscal revenue and expenditure saw faster growth in the first two months of 2017, driven by an improved economy and higher spending on social welfare, official data showed yesterday.

Fiscal revenue rose 14.9% Y/Y to 3.15 trillion yuan (US$456 billion) in January and February, accelerating from 4.5% in 2016, according to data from the Ministry of Finance.

The ministry attributed the revenue pickup to positive trends in the Chinese economy, citing improvement in industrial activity, company profits, foreign trade and resident consumption.

The government is increasing policies to curb property price inflation within major cities and stem broader capital outflows from the Chinese economy. We continue to see these two issues as risks that may yet be underappreciated by the markets.

Chart – IZZ ETF (China Large Cap)

 

 

 

 

ETF Watch: Resource Fund, QRE

Posted on | by Todd | Leave a Comment on ETF Watch: Resource Fund, QRE

Since posting multi-year highs in mid-January, share prices for resource giants BHP and RIO  have pulled back over 10%.

Over the last week, both shares have traded in a “higher low” pattern which has triggered a buy signal from our proprietary Algo engine.

With general market pricing appearing to be at, or near, full value, we are cautious about buying these names outright.

However, Investors looking to capture gains in the Australian resource sector without having to pick one stock can buy the BetaShare Resource Exchange Traded Fund (ETF).

The code is QRE, it’s made up of 10 Australian resource companies and is current paying a yield of 3.9%.

Of the 10 companies that make up the fund, BHP, RIO and Woodside Petroleum  make up 52% of the weighting.

Contact us for more information on QRE, or the other ASX-based  ETFs we are currently following.

Chart – QRE (ETF)

Index Rebalance

Posted on | by Leon Hinde | Leave a Comment on Index Rebalance

S&P ASX Index Rebalance – March Quarter

There were two changes in the ASX50 with Aristocrat (ALL) and Fortescue Metals (FMG) added and Coca Cola (CCL) and Seek (SEK) removed.

Macquarie Atlas (MQA) & Evolution Mining (EVN) added to the ASX100 with Sirtex (SRX) and Blackmores (BKL) removed.

There were no changes in the ASX200.

Washington H Soul Pattinson (SOL) added to the ASX300.

Chart – ALL
Chart – FMG