Technicals | Mar 28 2017
By Michael Gable
The Australian market had its first wobble last week, falling 90 points in one day as US markets had their first drop of more than 1% since October. US President Trump has since failed his first test of getting his healthcare package through and markets are now wondering how he will go with his company tax cuts. Remember, the US market is now pricing in the best case scenario of US corporate tax cuts, bringing the rate down towards 15 per cent. Any compromise on this leaves US stock valuations looking a bit stretched to stay the least.
One well-known leading indicator of the US markets is the Dow Jones Transportation Index. We have included a chart of that in today's report to see if it supports the case for a little more downside than upside over coming weeks. We can also see a nice trade getting set up with the Australian dollar, as well as the Euro. You don't need to be a currency trader to take advantage of these shifts. There are ETF's which can give investors a bit of diversification in these areas. Alongside gold, it may be worth adding some Euro and US dollars (short the Australian dollar).
Dow Jones Transportation Index
After making a new high at the beginning of the month, the index has been making lower lows and lower highs on a weekly basis. These three most recent candles on the weekly chart are known as a "3 black crows" formation and it is a negative sign. We have also taken out the low near 9000 which means the uptrend that started in January last year is now breaking down. We expect support to come in near 8200 – 8300.
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Michael Gable is managing Director of Fairmont Equities (www.fairmontequities.com)
Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.
Michael is RG146 Accredited and holds the following formal qualifications:
• Bachelor of Engineering, Hons. (University of Sydney)
• Bachelor of Commerce (University of Sydney)
• Diploma of Mortgage Lending (Finsia)
• Diploma of Financial Services [Financial Planning] (Finsia)
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2
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Disclaimer
Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.
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