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23/03/17
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Markets Summary
Australian Market Preview
The Dow Jones was lower for the fifth straight session, down -0.03% while technology shares were able to lead the Nasdaq 0.48% higher overnight. The volatility index (VIX) was up 3% as nervousness in the markets continues ahead of the Obamacare replacement bill vote in the House of Representatives which is scheduled in the US on Thursday. It still appears as this point as there aren't enough votes to pass the bill due to the opposition by conservative lawmakers.

Commodities were mixed overnight with iron ore down another 1% with the focus on Chinese market liquidity tightening. Copper rebounded with concerns easing around supply constraints.

Ahead of the local open the SPI futures were 19 points higher at 5,687.
To View the Full Morning Report Please CLICK HERE
Technical Analysis

XJO - S&P ASX 200 Index - The XJO failed to overcome the 5,800 resistance level on Wednesday after the pullback that occurred in the US on Tuesday night. It’s expected that the correction will continue in the short term with the XJO breaking down through the ascending triangle. Near term support can be seen at 5,600 but it’s expected that the market will pull back to the projected triangle target, closer to the more significant 5,400 support level. This is around a 5% pullback from current levels. The drivers are likely to continue to be both the financials and materials sectors in the short term.

2 Year Daily Chart

(please click on the above picture to view a full sized image)                                                                        Source: Factset

XXJ - Australian Banking Index (ex REITS) – The index has recently stalled around the short term pattern projection target of 7,600 and today broke down through the ascending triangle. It’s likely that the sector will pull back into the major support level of around 6,850 which ties in with the ascending triangle pattern projection target, and 200 day moving average where the banks should find some buying support.

2 Year Daily Chart

(please click on the above picture to view a full sized image)                                                                        Source: Factset
 

XMJ – Australian Materials Index – The index hit the significant 10,500 resistance level in Jan/Feb which it has failed to overcome and subsequently has now broken down through the uptrend line. This is telling us that the pace of the uptrend has now stalled and we may be either be seeing a consolidation phase or the start of a downtrend. In the near term the expectations are that the index is likely to pullback towards the 9,000 support level.

2 Year Daily Chart

(please click on the above picture to view a full sized image)                                                                        Source: Factset 

4 Year Weekly Chart

(please click on the above picture to view a full sized image)                                                                        Source: Factset

US S&P500 Index – There has been much talk that the US market has gotten ahead of itself of late and is due for a corrective pullback which looks like is occurring at present after the recent concerns that the bill to repeal Obamacare may not pass through Congress on Thursday. This is all creating doubt as to whether Trump will also be able to push through his proposed tax cuts and plans for infrastructure spending which could see setbacks in timing. The S&P500 has some support around 2,280 but is likely to pull back into the 200 day moving average closer to the 2,200 level in the near term. Major support can be seen at the 2,100 level.

2 Year Daily Chart

(please click on the above picture to view a full sized image)                                                                        Source: Factset


Michael Ron
Research Analyst

Recent Article - Oil & Gas
Oil and Gas Majors trying to be competitive in a structurally lower price environment

It is an economic reality that when commodity prices are high and margins are healthy, resource companies are encouraged to develop new supply. Besides the obvious rationale of taking advantage of high prices at the time, it is also easier to attract funding when margins are large as these wide margins give funders, both equity and debt, a margin of safety. The problem near or at the top of the cycle is the so called “rent seekers” also want their share of the “super” profits. Rent seekers can be governments, employees, consultants, manufacturers, suppliers and construction companies and they adjust their price expectations upwards thanks to good margins resource companies are earning. Over time as these expectations are met, the returns for the ultimate risk taker; the resource owner and the funders, may be much lower relative to the amount of risk taken. This process of changing resource prices and the resultant profits contribute to the cyclical nature of the resource industry. Resource companies always over invest at the top of the cycle and underinvest at the bottom of the cycle thereby increasing the volatility of cycles compared to other parts of the general economy.

But what happens when the fundamentals of the industry change after long periods of price stability?

Michael Eidne
Director - Research
To view the full article CLICK HERE
Recent Article - Lithium Production Supercharge
Greenbushes to double spodumene concentrate production: Implications for other producers and would be entrants

Talison Lithium, the 49/51 joint venture between Albermarle (ALB-US) and Tianqi Lithium Corporation (002466-SH), has announced its intention to double production at its world class lithium mine at Greenbushes, WA. The JV envisages commissioning a new spodumene concentrator by Q2, 2019. Annual production will increase from the current 80,000 tonnes to 160,000 tonnes of lithium carbonate equivalent (LCE).

This should come as no surprise. In September 2016, Tianqi announced they were moving towards a doubling of production to feed their newly approved chemical grade lithium plant at Kwinana, WA. Earthworks has just begun on the site which has a capital build estimate of $400m. ALB has also suggested that they may build their own chemical processing plant.

What does this mean for the lithium industry globally and here in Australia?

Paul Adams
Head of Research
To view the full article CLICK HERE
Recent Article - Forthcoming Changes to Superannuation
DJ Carmichael Wealth Management Breakfast - Thursday 9 March 2017
 
DJ Carmichael Pty Limited (DJC), recently hosted a Wealth Management Breakfast at the Parmelia Hilton, to update clients and guests about the forthcoming changes to superannuation.

These changes create a “layer of complexity” to the system that has not been in place since the 2007 changes removed “reasonable benefit limits”. The legislation changes come into effect from 1 July 2017.
To View the full article CLICK HERE
Consensus Information Books
As part of our research offering we're able to provide access to consensus information via our research books which include details of historical financials, consensus forecasts, valuations, growth rates, broker ratings, price targets and more.

Please click on the following links for samples of the books:

BHP Billiton Limited (BHP)

Qantas Airways Limited (QAN)

Telstra Corporation Limited (TLS)

 
If you would like to request a copy of a book for a stock/s that you're interested in, please contact your investment adviser on 08 9263 5200, email your adviser directly or email research@djcarmichael.com.au and include your account number and adviser's details.
To Access More Content CLICK HERE to Visit the DJC Website
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