Market Matters Report / Market Matters Report Saturday 29th August 2015

By Market Matters 29 August 15

Market Matters Report Saturday 29th August 2015

Market Matters Report Saturday 29th August 2015 

Good morning everyone,

Well, the story of last week was don't panic; rather, experience and enjoy the frenzied selling and buy!

In an amazing week the ASX200 closed up 49-points from last week, an impressive 335-points up from Tuesday’s panic low!

The aggressive selling early last week was caused by the markets fear over a weakening of the Chinese economy and impact globally. This issue has not gone away so we believe it's unlikely that equities can surge higher from current levels without spending some time tracking sideways enabling the market to assess and attempt to unravel the China story.

Conversely, US growth data (GDP) was extremely strong last week helping to comfort the market but also reigniting talk of interest rates increases in the US sooner rather than later.

Last Tuesday we sent an alert to subscribers saying that in our opinion ‘now’ is an excellent time to buy the market. Hopefully some subscribers acted upon this and have put some cash to work.

This week's report has a simple theme "sit back and wait". As you all know, we have been waiting for many months for a 2,500-point fall in the Dow; amazingly this has come to fruition in just a few days! We now anticipate consolidation prior to fresh all-time highs in US equities. On the other hand, the Australian market is likely to find it hard work breaking over 6000 until the banking capital requirements has been fully clarified.

Nevertheless, while we believe the index is tricky short term, what is becoming more evident daily is that the resources sector is rapidly gaining strength. We have been advocating zero resources in a portfolio over recent years but we now believe that for lovers of the space this is the time to buy.

· Both Crude Oil and Iron Ore look strong medium term; very interesting when the world’s concerned over China.
· In this space Market Matters is of the view that investors should focus on the large caps - BHP, RIO, WPL, OSH and FMG.

While we are overweight banks at present looking for sustainable yield we will be watching this "yield play" carefully, particularly as the US considers rate rises in a more focussed way. We do not believe the RBA will cut rates next week, preferring to have some ammunition if things get worse. Of course, a weak $A should, in theory, start to aid the domestic economy over coming years.

Summary:

1. We now believe it's time to sit back and see if the market can maintain the strong finish to last week.
2. High volatility means that we will consider selling calls against portfolios / purchases - recommended for sophisticated investors only.
3. 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 up 10-points on Monday.


 

Potential Investing opportunities for the coming week

· Hopefully investors put some capital to work into last week's panic, now it's time to sit back and see what follows.

· Sophisticated investors can sell call options into strong up days.

Potential Trading for the coming week

· Short term we believe the best action is to now stand back for a week and see the market evolve.


 

Portfolio / Trade Holdings

Our portfolio had an ‘ok’ week with a few clear winners and losers plus a numbers of stocks trading ex-dividend while the ASX200 rallied 0.9% overall.

1. Ansell (ANN) -0.3% - medium term investment.
2. ANZ Bank (ANZ) +0.7% - medium term investment.
3. Bendigo Bank (BEN) +0.8% - medium term investment.
4. Challenger (CGF) +2% - medium term investment.
5. Commonwealth Bank (CBA) +1% - long term investment.
6. Seek (SEK) -2% - medium term investment.
7. Vocus (VOC) +2.5%- medium term investment.
8. Woodside (WPL) +1.5%%- 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.

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 finally had our anticipated correction, albeit very sharply so some sideways price action is likely.

• The Dow has already exceeded predicted target.
• The more followed (by market observers and participants) S&P500 has been relatively stronger recently and fell 2% short of our target.

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 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 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 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 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) Monthly Chart

Chart 33 – ANZ Bank (ANZ) Monthly 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 59– 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 80c looming.


Commodities

We are looking for Gold to reverse up aggressively in coming months.

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.

Iron Ore remains positive for a countertrend bounce.


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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