US equity markets are trading at elevated valuations and we recommend caution for investors. There is now little room for error.
The graphs below illustrate a moderate “lower high” formation developing across all 3 major US indices.
The S&P/ASX 200 Index finished the week up 0.9%.
The best performer was the Consumer Discretionary sector, up 2.8% and the worst performer was the Telecoms sector, down 5.1%.
The XJO remains in a “lower high” formation with resistance at 5836.
Gold prices touched their highest intra-day level of the year on Friday, temporarily topping $1,300 an ounce before pulling back to settle unchanged on the day.
Gold had traded up to $1,303 for the first time in 2017, getting a lift from safe-haven demand on the back of weakness in global equities, a terrorist attack in Barcelona and concerns about President Trump’s pro-business political agenda.
Despite the late pull back into the weekend, the technical picture in Gold looks constructive. On a “measured move” basis, the break above $1300 points to the November highs near $1340.00 as the next area of resistance.
We still prefer the long side of NCM, along with smaller-cap miners EVN, SAR and NST.
Our medium-term price target for NCM is $23.10 and $2.80 for EVN.
Spot Gold
Newcrest Mining
Evolution Mining
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Our Algo Engine flagged the negative technical structure in leading financials firms Commonwealth Bank and Goldman Sachs. These are both leading industry names which have bearish price action developing.
Investors should remain on the short side of these assets.
The charts below illustrate the recent Algo Short signals along with the resistance or selling pressure, which is now building.
Our Algo Engine is now flagging the “lower high” technical structure in Bendigo Bank.
The stock has seen a short squeeze following the recent earnings result and is now likely to find renewed selling pressure at $12.40.
Investors should remain on the short side of this trade with a stop loss on a break back-up through the $12.50 range.
We also have a short signal in Bank of Queensland.
A reminder that both HVN and JBH have current Algo Engine short signals.
Selling pressure remains steady in these names and we prefer the short side from current levels.
We’ve been warning about a number of ASX large cap stocks which trade on 25X earnings and 2% yield and, at best, will deliver low single digit earnings growth.
Two examples are the recent sell signal posts we’ve made on Computershare and James Hardie.
We feel that the day of reckoning is approaching and, in many instances, as seen in CPU & JHX, the selling has already started and we’re now seeing a retracement back to the mean, (and likely beyond).
We’ll leave the 150x PE of Amazon, or the 200x PE of Netflix for a future posting, but suffice to say; reality will soon hit.
We continue to track GNC following the recent Algo Engine buy signal.
GNC has proven tricky in identifying the price reversal, however, we feel it is approaching an oversold level and ready for a bounce higher.
$8.50 is support and investors could build long exposure now with tight stops. a break below $8.50 may set-up a new buying range in or around $8.30.
Keep this one on your watch list.
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