Australia: S&P/ASX 200 (.AXJO) future gains limited

Australia: S&P/ASX 200 (.AXJO) future gains limited

Australia: S&P/ASX 200 (.AXJO) future gains limited

A strong rally to start 2019 has Australia’s stocks looking expensive, and that could be a bad sign for future gains.

The nation’s benchmark S&P/ASX 200 Index has advanced 16 per cent this year, causing valuations to swell. The gauge trades at an estimated price-earnings ratio of 17.1, a level it hasn’t hit since September 2016, data compiled by Bloomberg show.

“We just don’t think that the current levels are sustainable at all,” said Karl Goody, a private wealth adviser at Shaw and Partners. Goody said he doesn’t see much upside to the “inflated” prices given the high valuations, the absence of analyst upgrades and a lagging economy.

The equity surge in Australia has overtaken New Zealand’s rally as the second-best performance among major stock markets in Asia Pacific year-to-date, after China’s. The benchmark gauge has eluded the uncertainty surrounding the federal election, an inquiry into financial-industry misconduct and a worst-in-a-generation housing slump.

Not everyone thinks Australian stocks are poised to decline. An interest-rate reduction from Australia’s central bank, improved sentiment about the housing market and the anticipation of tax cuts could support an upswing in the second half of the year, Citigroup Inc. analysts led by Tony Brennan said in a note last week.

And while the S&P/ASX 200 Index has kept hitting fresh highs this year, it’s still more than 4 per cent away from reaching a record set almost 12 years ago.

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

The projected upper bound is: 6,670.16.

The projected lower bound is: 6,429.10.

The projected closing price is: 6,549.63.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 87.6120. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 4 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 65.43. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 14 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 126.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 5 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 1 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed down -1.300 at 6,542.400. Volume was 1% below average (neutral) and Bollinger Bands were 17% wider than normal.

Open High Low Close Volume___
6,543.7006,563.2006,534.3006,542.400 625,686,528

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 6,425.97 6,343.66 6,048.70
Volatility: 14 12 14
Volume: 672,185,344 592,133,632 619,278,848

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

S&P/ASX 200 is currently 8.2% above its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .AXJO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .AXJO and have had this outlook for the last 2 periods.

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