Market Matters Report / Market Matters Report Saturday 19th September 2015

By Market Matters 19 September 15

Market Matters Report Saturday 19th September 2015

Market Matters Report Saturday 19th September 2015

Good morning

Another somewhat crazy week in the markets!

During the week the Fed decided not to raise rates due to concerns around the global economy, especially China. Equities after an initial short lived relief rally have again adopted the "glass half empty" attitude with the Dow falling almost 600-points from its Thursday spike high!

The week saw the ASX200 manage a solid 2% advance while the Dow fell 0.3% but, very interestingly, the Emerging Markets MSCI Index, that Australia is linked to, rallied 3.5%.These are the first signs that even though the Australian market has been a poor performer in 2015 it, ideally, will start to outperform.

Turning to the Markets
As readers know, Market Matters has been flagging the likelihood of another spike low under 4900 for the ASX200 and if this is to arise then it is as an excellent buying opportunity; this now looks to be unfolding perfectly - see charts 2 & 3.

Importantly, the US S&P500 is currently unfolding exactly as we have been anticipating with a few weeks consolidation after August’s savage sell off and now a final spike towards 1825 likely - see charts 9, 10a & 10b.

After 3-4 weeks consolidation this "Weekends Report" is all about "Be Prepared". If we are correct and the market is going to spike lower in coming weeks the buying opportunity is likely to be very brief!

The story of lower interest rates for longer appears to have further to run hence when the market finally returns to some optimism, stocks with sustainable solid yield are likely to be chased aggressively.

  • Our distilled favourite 5 stocks and respective ideal purchase areas at present are: CBA ($71), CGF ($6.75), CSL ($86), MGG ($71) and SUN ($11.80).
  • Oil looks still to be under pressure falling almost 5% last night as markets become further concerned around the world's economy; if Santos again spikes down towards $4 it looks great value.
  • Last week gold finally commenced rallying (as anticipated). Our preferred stocks in the sector remain Regis Resources (RRL) and Northern Start Resources (NST).

The message for the coming week is to be prepared! The US markets are unfolding as expected with the ASX200 slowly gathering relative strength against the US.

We believe the next phase of the downwards movement in equities has commenced and will provide excellent buying opportunities should the ASX200 test the 4900 area. We see this as potentially a ‘spike’ into this region so investors and traders will need to be well prepared to take advantage of the opportunity

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

What Matters this week
The ASX200 looks likely to open down around 80-points (1.5%) on Monday after the 290-point plunge by the Dow.


               Potential Investing opportunities for the coming week

  • Hopefully investors put some capital to work into the panic on August 25th, we would aggressively add to purchases in the 4900 area.


              Potential Trading for the coming week

  • Short term we believe the best trading action is also to now stand back and look to allocate any remaining capital to the market if the ASX200 retests the 4900 area.
  • Santos (STO) looks excellent risk / reward buying on any spike down towards the $4 area with options a potential vehicle.


Portfolio / Trade Holdings

Our portfolio had a good week outperforming the ASX200 with only ANN letting the team down - the ASX200 bounced another 2% led by the banks overall.

1. Ansell (ANN) -4.7% - medium term investment.

2. ANZ Bank (ANZ) +3.2% - medium term investment.

3. Bendigo Bank (BEN) +2.5% - medium term investment.

4. Challenger (CGF) +1.9% - medium term investment.

5. Commonwealth Bank (CBA) +0.9% - long term investment - may be weak early next week when it resumes trading after final placement of shares for its capital raising.

6. Seek (SEK) +0.7% - medium term investment.

7. Vocus (VOC) +4.9%- medium term investment.

8. Woodside (WPL) +4.5% - medium term investment.

  • Cash for future purchases ~15%.

Australian ASX200

We continue to look to spread our investments into a more diversified portfolio with sustainable yield in an environment where cash and no debt is likely to be king.

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 Banking Index Monthly Chart

Chart 5b 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 finally had our anticipated correction, albeit very sharply, in August. Sideways price action was anticipated short term and this may just about be over.

  • The Dow has already exceeded predicted target.
  • The more followed (by market observers and participants) S&P500 has been relatively stronger and to date has fallen 2% short of our target ..which we still believe will be achieved.

Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Dow Jones Index Weekly Chart

Chart 10a – US S&P500 Index Monthly Chart

Chart 10b – US S&P500 Index Weekly 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 the clearest leads coming from the UK's FTSE and Spanish IBEX.

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 & Emerging Markets Indices

Asian indices have been extremely volatile over recent months in sympathy with the plunging Chinese stock market and weakness / devaluation of the Yuan. The Nikkei looks to be technically set for a decent correction.

Chart 20a – Hang Seng Weekly Chart

Chart 20b – China Shanghai Composite Index Monthly Chart

Chart 21 – Emerging Markets Index Monthly Chart

Chart 22 – Japanese Nikkei 225 Index Monthly Chart

Australian Stocks

Quality stocks with sustainable yield have been standouts over recent times but some industrial and finally resource stock 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 trading 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 25c – Oil Search (OSH) 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) Monthly Chart

Chart 33a – ANZ Bank (ANZ) Monthly Chart

Chart 33b – ANZ Bank (ANZ) Daily 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

Chart 51 Ramsay Healthcare (RHC) Monthly Chart

Chart 52– Resmed (RMD) Weekly Chart

Chart 53 - Ansell (ANN) Monthly Chart

Chart 54 – Amcor Ltd (AMC) Monthly

Chart 55 – Crown Resorts (CWN) Monthly

Chart 56– Myer Holdings (MYR) Weekly

Chart 57– JB Hifi (JBH) Monthly

Chart 58– Harvey Norman (HVN) Monthly

Chart 59a– Australian Dollar (AUD) Weekly Chart

The $A continues to decline with an ultimate technical target now well under 70c BUT we can see a bounce towards 75c looming.

Chart 59b– The $US Index Monthly Chart

We are looking for Gold to continue its recent strong rally.

Copper remains very negative on a longer term basis which is a very similar chart pattern to Newcrest Mining (NCM) and, unfortunately, we have all seen what happened there.

As anticipated, Crude Oil made fresh 2015 lows causing us to watch carefully for buying opportunities within the sector. We are bullish from current levels.

Iron Ore remains positive for a countertrend bounce towards $US65-70/tonne.

Chart 60 – Gold Monthly Chart

Chart 61 – Copper Monthly Chart

Chart 62 – Crude Oil Monthly Chart

Chart 63 – Iron Ore Monthly Chart

Please note this is our personal TECHNICAL opinion of markets and "General Advice" taking no account of individual’s circumstances.

Have a great week,
The Market Matters Team

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