Summary Cracks are appearing in the bull trend as the S&P/ASX 200 Futures - Dec 17 tumbles briefly through the 6,000 thresholds overnight. Yesterday, the Australian sharemarket bulls were not as accommodating to take the upside challenge. The benchmark S&P/ASX200 dusted off early gains, after printing a 6,029.40 high. Prices settled at 6,021.77 at the close. Overnight, the SPI Futures (Dec) the days soft sentiment and staged a brief tumble through the 6,000 threshold and struck a 5,984.5 low, before rebounding back to nearly where the market opened Market Overview ASX200 6,021.77 0.13% SPI Futures (Dec) 6,015.00 0.16% S&P 500 2,584.84 0.10% Nasdaq 6,757.60 0.10% Oil (WTI) $56.69 0.09% Iron Ore $61.90 0.29% (Spot) Gold $1,277.81 0.15% AUD/USD US0.7624 0.48% at 6,025.0. It will be interesting to see if the market can keep above the 6,000 level today, considering the local sharemarket did start on a wobbly foot yesterday. Viewing the benchmark S&P/ASX200 graph, a decisive break beneath 5,990 would widen the cracks further for the bear trend and expose the bull camp situated around 5,935-45. Resistance on the day is seen from 6,030. In the Markets The Fab Four (banks) Yesterday saw a weaker side of the banking sector with Westpac (WBC) and ANZ Bank (ANZ) initially weighing on the market. The lenders traded ex-dividend, with WBC falling 2.4% to $32.45, while ANZ lost 2.7% to $29.51. The Commonwealth Bank (CBA) just kept its head above water, after posting mild gains by +0.83% to $81.53. The National Bank was up + 0.43% to $30.57. 1
GE (General Electric) slump, tax plan doubts pressure Wall Street Overnight, Wall Street's main indexes were under pressure in early afternoon trading after GE (General Electric) shares hit their lowest in five years and investors still showing concerns over the future of the U.S. tax reform plan. General Electric slashed its dividend and profit forecast earlier in the day while unveiling a plan that narrowed its focus on aviation, power, and healthcare. Shares of the industrial conglomerate fell 7.6 percent as investors worried that plans for a years-long transformation did not show how the slimmed-down company would generate cash to justify its stock valuation. Investors are closely tracking developments around the tax bill after Senate Republicans last week unveiled a new plan that differed from the House of Representatives' version. Hopes of lower taxes, one of President Donald Trump's main campaign promises, have helped drive the S&P 500 up about 20 percent since the 2016 presidential election. The Dow Jones Industrial Average was up 0.07%, at 23,439.70, the S&P 500 was up 0.10%, at 2,584.84, and the Nasdaq Composite was up 0.10%, at 6,757.60. Eight of the 11 major S&P indexes were higher, led by defensive utilities and consumer staples stocks. Industrial stocks were the biggest laggards after GE's decline. Are the Oil bears gathering quietly? Overnight, crude oil prices were mild weaker but relatively unchanged from the previous day. On the New York Mercantile Exchange crude futures for December delivery rose 2 cents to settle at $56.69 a barrel, while on London's Intercontinental Exchange, Brent lost 32 cents to trade at $63.20 a barrel. Crude oil prices traded in a narrow range on Monday as investors weighed the prospect of supply disruption in the Middle East which could support a short-term rally. The Middle East tensions grew over the weekend, fuelling expectations of supply disruptions in the region after Bahrain said Iran was behind an explosion to its main oil pipeline. Supply was shortly restored. The market attention was turned to the Baker Hughes reported last Friday after reporting that the number of oil rigs operating in the US rose by 9 to 738, the highest in almost a month. Tuesday, November 14 - The International Energy Agency will release its monthly report on global oil supply and demand. Later in the day, the American Petroleum Institute, an industry group, is to publish its weekly report on U.S. oil supplies. Wednesday, November 15 - The U.S. Energy Information Administration is to release weekly data on oil and gasoline stockpiles. Thursday, November 16 - The U.S. government is set to produce a weekly report on natural gas supplies in storage. Friday, November 17 - Baker Hughes will release weekly data on the U.S. oil rig count. What is the technical outlook for oil? The technical outlook remains overbought. It is viewed that the market will either consolidate or ease away from the significant resistance seen at $58.00. The downside targets are to $56.50-55, or even lower to $55.00. Reassess from there 2
Gold price shine returns on Tax Overhaul Jitters Overnight, the price of gold rose amid an uptick in safe-haven demand as investor uncertainty over the outcome of tax reform continued. The price for spot gold rose by 0.15%, to $ 1,277.81. The House of Representatives is expected to vote this week on a major tax reform bill amid uncertainty over the outcome of the bill after the head of the House of Represents tax-writing committee said on Sunday he would not accept elimination of a federal deduction for state and local taxes. With a 52-seat Senate majority, Republicans can only afford to lose two GOP senators as Democrats are widely expected to vote no, but Vice President Pence would have to break a tie. Calm before the Storm : Iron ore remains in consolidation mode You could not hear the squeak of the machinery on Friday, as the iron ore spot markets finished on a lacklustre note, continuing to consolidate upon the gains achieved earlier last week. According to Metal Bulletin, the price for benchmark 62% fines rose 0.5% to $62.60 a tonne, largely reversing a similarly-sized decline on Thursday. Rio Tinto secures $750m share buy-back Rio Tinto has completed a $750 million off-market buy-back of the company s shares, an increase on a $700 million target it had previously set due to strong demand. The buy-back, at $63.67 a share, was at a 14 percent discount on Rio s market price. Rio announced the buy-back program in September as part of its plan to return the proceeds from the $2.5 billion sales of its Coal & Allied thermal coal division to Yancoal Australia. The miner bought back around 11.8 million shares for $750 million, which represents 2.78 percent of its ordinary share capital. Rio has committed to buybacks worth more than $4 billion in 2017. This year we have announced cash returns to shareholders of $8.2 billion, comprising $4.2 billion of dividends and $4 billion of share buy-backs. Shareholder returns of this scale are made possible by maintaining the strongest balance sheet in the sector and a disciplined capital allocation process, Jacques said. 3
The Australian Dollar bears are closer to the US0.7580 objective! Regardless of the price action trading mostly sideways over a period of twelve-days, the Australian dollar finally staged a return of weakness overnight and fell from US0.7665 highs to a New York low of US0.7616. Earlier in the week, the Reserve Bank of Australia left its benchmark interest rate unchanged at 1.50%. On Friday, the release of the RBA Monetary Policy Statement showed that the Reserve Bank has slightly downgraded its outlook for economic growth in Australia while signaling only a gradual rise in headline inflation. In its quarterly statement on monetary policy released, the RBA sees growth in December 2017 of 2.5 percent easing back from 2 to 3 percent in the previous forecast issued in August. The Australian Dollar is buying around US0.7620 cent this morning. Measuring the quality of the daily technical studies the Australian dollar is not expected to uphold renewed gains above the 0.7680-90. The objective holds to 0.7580. Reassess from there. Market Movers Biggest risers - AusCann Group Holdings Ltd (AC8) - ($0.80, up + 10.34%), Janus Henderson Group PLC (JHG) ($48.82, up + 2.24%), Lithium Australia (LIT) ($0.25 up + 2.04%) Biggest fallers - Xero (XRO) ($27.65, down 5.02%), Ardent Leisure (AAD) ($1.755, down 2.50%) The Bears Stocks tipped to fall Xero (XRO) ($27.65, down 5.02%) The rejection of $32.42 has initiated the negative bias, with the immediate target holding to $26.00-40. Resistance comes in from $30.80 and then firmer from $31.80 to $32.60. AusCann Group Holdings Ltd (AC8) - ($0.80, up + 10.34%) Weakness is expected to increase this week with the outcome reaching the region of $0.62, to $0.58. Reassess from there, as a rebound could see this stock recapture momentum and erase the losses to $0.84-0.86. 4
Santos (STO) - ($4.58, up + 2.00%) Further losses are expected since last week s peak at $4.78, with the expected outcome reaching the region of $4.10-35. Reassess from there. Resistance caps from $4.80 to $5.05. Ardent Leisure (AAD) ($1.755, down 2.50%) Renewed weakness is expected to emerge before viewing this stock as a potential buy. Fresh advances are not expected to sustain from $2.10-20. Towards $1.50, $1.68 should draw the attention to potential buyers. The Bulls Stocks that are expected to rise Newcrest Mining (NCM) ($23.34, up + 0.65%) Although we see a slight weak display, fresh gains are expected this week with the immediate target holding to $25.30. Reassess from there. Support holds from $22.40, firmer from $21.90 Janus Henderson Group PLC (JHG) ($48.82, up + 2.24%) This stock has the potential to further gains, with the immediate resistance (target) at $52.70. Support holds at $44.70; uptrend is at $43.90 Change Financial (CCA) ($0.87, up + 1.16%) A bullish comeback is expected to be seen this week for this stock with the immediate target holding to $1.18-22 Support holds at $0.72 Lithium Australia (LIT) ($0.25 up + 2.04%) Further demand should see this stock perform well this week, with the targets holding to either $0.31 or $0.36. Support holds from $0.17. Company Last Price Buy / Sell Price Target Confidence XRO $27.65 S $26.00-40 AC8 $0.80 S $0.62 STO $4.58 S $4.10-35 AAD $1.755 S $1.50 NCM $23.34 B $25.30 JHG $48.82 B $52.70 CCA $0.87 B $1.18-22 LIT $0.25 B $0.31, $0.36 ECONOMIC CALENDAR Tuesday, November 14 Australia is to release data on business confidence. China is to publish reports on industrial production, fixed asset investment, and retail sales. Federal Reserve Chair Janet Yellen, European Central Bank President Mario Draghi and Bank of England Governor Mark Carney are among central bankers due to speak at an event hosted by the ECB in Frankfurt. The UK is to produce inflation data. The U.S. is to publish data on producer prices. Disclaimer: Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. There are risks involved in any financial investment and the value of any investment can and does fluctuate and may even become valueless. This research is based on information obtained from sources believed to be reliable but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. Kaz Capital does not accept any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. Unless otherwise noted, market and stock price outlook is taken from a technical perspective and seen from the oscillator s pattern being (Stochastic, MACD, RSI, and momentum), with no fundamental influence taken to these views. 5