Market Matters Report / Market Matters Report Saturday 15th August 2015

By Market Matters 15 August 15

Market Matters Report Saturday 15th August 2015

Market Matters Report Saturday 15th August 2015

Afternoon all,

The ASX200, much like ourselves, had an extremely tough week falling 2.2% to a 7 month low - we have been targeting the 5200 area, another 3% lower. The index is already down 6% for August and CBA is still to both recommence trading after its capital raising on Monday and pay a $2.22 fully franked dividend on Tuesday. The "Big 4 Banks" have been the major story of the Australian market of recent times with the Banking Index already down over 18% from its 2015 highs. The ASX200 is only down 10.7% from its 2015 highs, even with resources crumbling, but conversely the US S&P500 closed on Friday only 2% below its all time high reached in May this year. These current market movements are a great example that both investors and traders should view all stocks and indexes as individual entities. With so much activity over recent weeks, this weekend report is a great opportunity to stand back and focus on what we believe the rest of 2015 will deliver us investors.

Our views at a glance:

1. Market Matters believes CBA will open around $78 on Monday, down ~5%. After going ex-dividend ($2.22) on Tuesday, the stock is likely to test the $76 area. We will be keen buyers around the $78 area on Monday and, of course, we will be taking up our $71.50 rights issue. Our opinion of recent months remains unchanged - CBA will trade between $75 and $90 for the next 18 months and pay a very healthy 5.4% pa fully franked dividend - see charts 32a & 32b.

2. The likely weakness in CBA and BEN which both go ex-dividend on Tuesday will likely bring the Banking Index down to our long-term target and we may purchase the balance of our anticipated ANZ holding - see charts 5b & 5c.

3. We still believe that the US indices, German DAX and Japanese Nikkei will make fresh 2015 highs prior to decent corrections. Hence traders may look to be sellers in this area and sophisticated investors write calls against portfolios.

4. Crude oil achieved our forecasted fresh 2015 lows last week, we will now be looking for triggers to add to our Woodside holding, or buy Santos. We have our "oil buy" hat on BUT there is no hurry at present as the negative momentum is strong.

5. Our options trade in Fortescue (FMG) was very disappointing last week with paper profits vanishing quickly as the Chinese entered the FX markets with a bang. RIO and BHP look likely to trade lower so we will be looking for exit opportunities even though Iron Ore remains firm.

6. After reconsideration we still believe gold is preparing for a strong rally into Christmas but interestingly Newcrest remains negative and Regis positive. Watch for alerts as we may buy back into RRL, last time we did this was with iiNet and a takeover followed a few days later!

7. One of our holdings Ansell (ANN) was hit for six falling 14% in the week but at least it payed a 23c dividend, we still like the stock, just not our entry level - see chart 53.

8. A few other stocks are approaching our buy zones e.g. Macquarie (MQG), Ramsay (RHC) and Amcor (AMC).

A few subscribers wondered why we bought a parcel of ANZ last week when we sold our RRL and NST, a very fair question. The simple answer is we tend to buy, or sell, areas. Picking exact "tops & bottoms" is a thing of myth or luck. We were aggressive sellers up around 6000 earlier in the year and now we are looking to reverse that as the ASX200 falls towards 5200. If we sell a decent part of our portfolio at an average of 5900 and buy it back at an average of 5300, we are simply very happy. The only factor restraining us from considering a leveraged long position around the 5200 area if reached shortly is the potential correction for US indices, we want some ammunition to buy if this occurs.
Any subscribers not familiar with codes or companies can check these on the ASX website: - See charts of all below.


No major change here:

1. We now have our buyer's hat in place and are likely to start with CBA on Monday.

2. We continue to have no interest investing in the resources sector but trading opportunities continue to be targeted.

* Watch closely for Market Matters alerts via SMS and email.

What Matters this week

The ASX200 looks likely to open down around 15-points on Monday courtesy of CBA.

Potential Investing opportunities for the coming week

  • Hopefully investors are now sitting on a decent cash position awaiting buying opportunities – see above.
  • We are currently wearing our buyer's hat with CBA, ANZ, MQG, RHC, and AMC in our sights.

Potential Trading for the coming week

  • Short term is tricky until the CBA dust has settled, but our short-term bias is positive.
  • For aggressive traders and investors we are long FMG and considering again buying Regis Resources (RRL).

Portfolio / Trade Holdings

Our portfolio struggled this week, losing to the overall market - the ASX200 fell 2.2%.

1. Ansell (ANN) -14% - medium term investment.

2. ANZ Bank (ANZ) -2.8% - medium term investment.

3. Challenger (CGF) -3.1% - medium term investment.

4. Commonwealth Bank (CBA) suspended - long term investment.

5. Seek (SEK) -5% - medium term investment.

6. Vocus (VOC) -1.8%- medium term investment.

7. Woodside (WPL) -3.3% - medium term investment.

· Fortescue (FMG) October 1.75 Calls - Trade.

· Cash for future purchases, ~35%.

Australian ASX200

We continue to look to spread our portfolio into more diversified portfolio with the banking index interesting at present.

Chart 1 – ASX200 Monthly Chart

Chart 2 – ASX200 Weekly Chart

Chart 3 – ASX200 Daily Chart

Chart 4 - SPI (Share Price Index) Futures 60 mins Chart

Chart 5a  ASX200 REIT Index Monthly Chart

Chart 5b ASX200 Banking Index Monthly Chart

Chart 5c ASX200 Financials Index (excl. REIT's) Weekly Chart

Chart 6 Volatility Index VIX Weekly Chart

Chart 7a – The US 10-year Interest Rate Quarterly Chart

Chart 7b – The German 10-year Interest Rate Quarterly Chart

 American Equities

The American indices continue to show signs of a topping pattern for 2015 but our preferred scenario is one fresh high for 2015.

Chart 8 – Dow Jones Index Monthly Chart

 Chart 9 – Dow Jones Index Daily Chart

Chart 10a – US S&P500 Index Monthly Chart

Chart 10b – US S&P500 Index Daily Chart

Chart 11 – NYSE Composite Index Monthly Chart

Chart 12 – Russell 2000 Index Monthly Chart

Chart 13 – US NASDAQ Index Monthly Chart

Chart 14 – The Canadian Composite Index Monthly Chart

European Indices

Most European Indices appear to be in the middle of a decent correction with clearest leads coming from the UK's FTSE and Spanish IBEX. However, the DAX remains technically positive.

Chart 15 – Euro Stoxx 50 Index Weekly Chart

Chart 16 – UK FTSE Index Weekly Chart

Chart 17 – Spanish IBEX Index Monthly Chart

 Chart 18 – German DAX Index Monthly Chart

Chart 19 – German DAX Index Weekly Chart 

 Asian Indices

Asian indices have been extremely volatile over recent weeks on the back of a plunging Chinese market, we believe this represents a good long term, albeit aggressive, buying opportunity. However, the Nikkei looks technically a sell into fresh 2015 highs.

Chart 20 – Hang Seng Weekly Chart

Chart 21 – China Shanghai Composite Index Monthly Chart

Chart 22 – Japanese Nikkei 225 Index Monthly Chart

 Australian Stocks

Quality stocks with sustainable yield have been standouts but some industrial stocks are now looking better. We are now a buyer of the “yield play” after its 18-20% correction and looking to invest in growth / overseas earning stocks BUT not resources. However, we're no longer bearish the resources sector from a risk / reward perspective.

Chart 23 – BHP Billiton (US) Monthly Chart

Chart 24 – BHP Billiton (BHP) Weekly Chart

Chart 25a – Woodside Petroleum (WPL) Weekly Chart

Chart 25b – Santos (STO) Weekly Chart

Chart 26 – RIO Tinto Ltd (RIO) Weekly Chart

Chart 27 – Fortescue Metals (FMG) Weekly Chart

Chart 28 – Vale (US) Weekly Chart

Chart 29 – Newcrest Mining (NCM) Monthly Chart

Chart 30a – Regis Resources (RRL) Weekly Chart

Chart 30b – Northern Star Resources (NST) Weekly Chart

Chart 31 – Barrick Gold Corp. (US) Monthly Chart

Chart 32a – Commonwealth Bank (CBA) Quarterly Chart


Chart 32b – Commonwealth Bank (CBA) Weekly Chart

Chart 33 – ANZ Bank (ANZ) Monthly Chart

Chart 33b – ANZ Bank (ANZ) Weekly Chart

Chart 34 – Westpac Bank (WBC) Weekly Chart

Chart 35 – National Australia Bank (NAB) Weekly Chart

Chart 36 – Macquarie Group (MQG) Monthly Chart

Chart 37a – Bank of Queensland (BOQ) Weekly Chart

Chart 37b – Bendigo & Adelaide Bank (BEN) Monthly Chart

Chart 38 – AMP Ltd (AMP) Weekly Chart

Chart 39 – Challenger Financial (CGF) Monthly Chart

Chart 40 – Suncorp Group (SUN) Monthly Chart

Chart 41 – Insurance Australia (IAG) Monthly Chart

Chart 42 – QBE Insurance (QBE) Monthly Chart

Chart 43 – Wesfarmers Ltd (WES) Weekly Chart

Chart 44 – Woolworths Ltd (WOW) Quarterly Chart

Chart 45a – Seek Ltd (SEK) Monthly Chart

Chart 46 – Telstra Corp. (TLS) Monthly Chart

Chart 47– M2 Group Ltd (MTU) Monthly Chart

Chart 48a – Vocus Communications (VOC) Weekly Chart

Chart 48b – TPG Telecom (TPM) Monthly Chart

Chart 49 – Westfield Corp. (WFD) Monthly Chart

Chart 50– CSL Ltd (CSL) Monthly Chart