Market Matters Report / Market Matters Report Saturday 5th September 2015

By Market Matters 05 September 15

Market Matters Report Saturday 5th September 2015

Market Matters Report Saturday 5th September 2015

Good afternoon everyone,

Overview

Well, the story of last week was ‘don't panic’! Rather, our message during the week was to stand back, watch the position of the market and wait for the market to fall to irresistible levels. The market has, in our view been providing some great value but the irresistible levels are now approaching fast. It is now 6 months since the commencement of the complex topping process on the ASX 200; this is always a strong time for a change in trend which when combined with our price and other time targets continue to support our view that these market levels are excellent value for investment.

As feared, the market encountered more selling during the week with the ASX200 falling 4.2% as the ‘little Aussie battler’ plunged to 69c and the US S&P500 falling 3.4%.

The local market has significantly underperformed world markets as overseas investors have desired zero exposure to the collapsing $A; the ASX200 has fallen 6% more than the S&P500 in absolute terms! Investors should be aware that the "smart" overseas investors left our shores when the $A was close to parity with its American equivalent; hence with it down at 69c some of our stocks are looking cheap. To a $US denominated fund our market has fallen by almost 50%!!!

To the Market

  • When the overseas based funds decide to start buying our discounted stocks the rally is likely to be explosive and sustained.
  • We believe that Friday's psychological dip under 70c may slowly bring a few overseas investors shopping. Noticeably on Friday night the Dow fell 1.7% but our SPI is only targeting a fall of 0.5%, implying we are slowly gaining strength.
  • We are currently in a "glass half empty" frame of mind with US equities falling over 1% for the 6th time in 12 days last night as employment data showed the lowest level of unemployment in 7 years increasing fear of an interest rate rise sooner rather than later.
  • Technically we believe that the US equities are likely to see a fresh low for 2015 some 5% lower than current levels. However, we believe the ASX200 is likely to outperform from here and any retest of 4900 should be bought aggressively (approx. 3% lower).
  • Our favourite 8 stocks at current levels, in alphabetical order and with prices in brackets are: AMC ($13.10), ANZ ($26.20), CBA ($71), CGF ($6.70), CSL ($86), MQG ($70), RHC ($58) and SUN ($11.80).
  • Lastly, we have been very anti resources for the last few years but the sector is gaining strength and for the believers in full diversification we would advocate the large caps - BHP, RIO, WPL, OSH and FMG.

Summary:

1. We now believe it's time to be patient BUT ready to strike aggressively if the market retests 4900.

2. High volatility means that we will consider selling calls against portfolios / purchases, especially if leveraged - recommended for sophisticated investors only.

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

What Matters this week

The ASX200 looks likely to open down 25 points on Monday ignoring most of the 272-point fall on 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.
  • Sophisticated investors can sell call options into strong up days.

Potential Trading for the coming week

  • Short term we believe the best trading action is also to now stand back and look to aggressively allocate capital to the market if the ASX200 retests the 4900 area.

Portfolio / Trade Holdings

Our portfolio had a poor week with the banks under pressure, overall it moved in line with the market - the ASX200 was savaged -4.2% overall.

1. Ansell (ANN) -0.7% - medium term investment.

2. ANZ Bank (ANZ) -5.6% - medium term investment.

3. Bendigo Bank (BEN) -5.2% - medium term investment.

4. Challenger (CGF) -6.9% - medium term investment - ex-dividend.

5. Commonwealth Bank (CBA) -5.5% - long term investment.

6. Seek (SEK) -1.7% - medium term investment.

7. Vocus (VOC) +0.7%- medium term investment.

8. Woodside (WPL) -4.6% - 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 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 so some sideways price action is likely short term.

  • 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 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 80c looming.

Chart 59b– The $US Index Monthly Chart

Commodities

We are looking for  Gold to reverse up  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. We are bullish from current levels.

 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

 
Reports and other documents published on this website (‘Reports’) are authored by Market Matters. The MarketMatters Reports are based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is, or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position.
The Reports contain general, as opposed to personal, advice. That means they are prepared for multiple distribution without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of a financial advisor.
The Reports are published by MarketMatters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports.
If you rely on a Report, you do so at your own risk. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence. The author holds an interest in the financial products of ANN, ANZ, BEN, CBA, CGF, SEK, VOC and WPL.