Australian Investment Blog

Good Morning everyone, Our short term view and plan for equities World stock markets hardly moved overnight but we saw further weakness from our resource stocks with BHP looking to open ~ $19.80 down another 2.8%. BHP will now be down 6.9% from its high last Thursday. We stick with our view that on number of matrices, which includes risk / reward, we cannot be long iron ore stocks now. However, as we outlined in the Weekend Report we have switched cautiously bullish on the local banks short term, keeping a close eye on ANZ, NAB and WBC which go ex-dividend next month - some attractive fully franked dividends will be on offer. This view is short term in nature only and we still anticipate lower levels for the banks in the medium term. However we believe the S&P500 is poised for a decent correction which may easily become 5% as investors become scarred of the May factor approaching - "sell in May and go away". Hence while we must remain conscious of our medium / long term negative view for US equities decent risk / reward opportunities should arise if this pullback in US equities unfolds in the near term. In short, we expect weakness now in the U.S, one more bounce then a bigger correction. The US S&P500 Daily Chart We will look at the three above mentioned banks individually with a specific eye on risk / reward. ANZ Bank (ANZ) Weekly Chart ANZ Bank has been the worst performing "Big Four" Bank in recent times being punished for its relatively large exposure to both Asia and resource / energy companies. After falling 41.3% from its highs of 2015 a short squeeze similar to that enjoyed by the resources sector would be easy to imagine. Ideally we can buy ANZ ~$23 with stops under $22 but this may be tweaked depending on coming days / weeks price action. National Australia Bank (NAB) Weekly Chart