Page 1 of 8

The views expressed in this report are those of Lesley Beath and may differ from Morningstar's views.

Reviewed this week

Company reviews to follow.

• Overview
  Potential for decline into Sept/Oct remains. More...
• Monadelphous (MND)
  Further weakness. More...
• Domino's Pizza (DMP)
  Near support, but risk is to the downside. More...
• GPT Group (GPT)
  Waiting for a better entry level. More...
• APA Group (APA)
  A deterioration in the price structure. More...
• Nufarm (NUF)
  At a barrier. More...
• Goodman Group (GMG)
  Time for taking some profits. More...

Please note: before making an investment decision, Morningstar recommends you read the fundamental research available on these stocks.

Disclaimer: To the extent that any content in this report constitutes advice, it is general advice that has been prepared by Lesley Beath without taking into account the particular investment objectives, financial situation and particular needs of any individual investors. If necessary, you should consult with a licensed investment adviser or dealer in securities such as a stockbroker before making an investment decision. Opinions expressed herein are subject to change without notice and may differ or be contrary to the opinions or recommendations of Morningstar as a result of using different assumptions and criteria.

Overview

Last week, I highlighted the action in the US Dollar Index and the US T-Bonds. Both showed signs of weakness as they tested important resistance levels.

In the case of the dollar, that resistance (0.8367) has been in focus for the past couple of months. And with the bonds, the resistance was the upper limits of the secular trend channel, which dated back to 1986–1987.

The CRB Index was also testing resistance (the April 2011 downtrend) and this combination suggested we were facing a possible turn in the dollar, which could boost equities and commodity markets.

A retreat into September/October was still anticipated, but action suggested the current rally in the US equity market could extend into late August. The thinking behind that view was that as T-Bonds and the dollar were viewed as safe-haven assets, any pullback in those would imply the so-called "risk-on trade" had further to run.

Well, there was further deterioration in the dollar and T-Bonds as the week progressed. Friday's decline in both was in conjunction with a sharp increase in the equity market, and this rebound (+1.9 per cent in the S&P 500) recouped the losses that were registered early in the week.

This is encouraging but the worrying thing is the action in the equity market continues to suggest risk is to the downside.

(click image to enlarge)

(click image to enlarge)

(click image to enlarge)

(click image to enlarge)

If we take the Dow Jones Industrials and the Dow Jones Transports, the latter remains within the downtrend that commenced in mid-March. It must be remembered that a Dow Theory non-confirmation was registered earlier in the year and it remains in place.

As way of background information, put briefly, a Dow Theory non-confirmation occurs when a new high or low in one index is not confirmed by the other. Thus, market turning points can occur when the two averages trend in opposite directions.

These non-confirmations are not necessarily viewed as immediate Sell signals, but they do give out a warning.

If we look back over the past few years, we see that at the 2007 high, Transports peaked in July 2007 but the Industrials pushed to new highs in October 2007.