Market Matters Report / Market Matters Summary for Saturday 12th July 2014

By Market Matters 12 July 14

Market Matters Summary for Saturday 12th July 2014

Market Matters Summary for Saturday 12th July 2014

 


Market Matters Summary for Saturday 12th July 2014

  • The ASX200 closed down 38 points (-0.7%) last week, following markets in the US, but noticeably outperforming a weak Europe, courtesy of Portugal that created fresh concerns around the Euro Banking system.
  • The sideways boring price action continues as the ASX200 trades between 5,355 and 5,555 - now for 15 weeks.
  • We are clearly in a “stock pickers” market with interest rates remaining the big determining factor.
  • Friday’s surprisingly strong recovery, led by the banks, was explained when a story crossed my desk at midday from the Financial Review that Goldman Sachs were forecasting a rate cut in Australia to 2.25% after only 4 days previously forecasting a rate rise earlier than anticipated in the US. Music to the RBA who need the $A lower!
  • For equities, this implies the yield play has further to evolve but analysts should be wary of 2015 earnings estimates across the market as a whole. I remain of the view that chasing pre yield is becoming a dangerous strategy.
  • The individual stock / sector volatility remains significant, over the last 5 days we have seen Fortescue (FMG) fall 7.3% while BHP was unchanged. Further confirmation that we are entrenched in choppy market where great opportunities will come and go much quicker than over previous years.
  • I remain confident of an 8-10% correction over coming months for the failing German DAX and US Russell 2000, small cap Index, by far the hardest thing to predict is how the domestic ASX200 market will perform during this time.
  • I also confirm that I will be an aggressive buyer of equities if this correction eventuates. 

 

What Mattered Last Week

Last week was yet again very choppy for the ASX200 on a daily basis as Friday’s strong 45 point bounce repaired some of the damage from a week where selling was generally dominant.

On the performance front, the below stocks caught my eye over the last 5 trading days:

  • Positive Performance IAG +0.8%, Mineral Resources (MIN) +5.9%, Myer (MYR) +4.6% & Primary Healthcare +2.8%.
  • Negative Performance Bank of Queensland (BOQ) -4%, CSL -1.5%,  Fortescue (FMG) -7.3%, Macquarie Bank (MQG) -2%, Navitas -25.4% & Oilsearch (OSH) -3.4%.
  1. I am holding 30% in cash, with equal weighting in Ansell (ANN), Flight Centre (FLT), M2 Group (MTU), & Seven West Media (SWM). Also note from my positions I am net negative the overall index via XJO options.
  2. A few stocks are starting to “twitch” my radar for buying/ accumulation into weakness.
  3. Patience has paid off with a few stocks hitting our buy levels even though the index remains firm.

What Matters this week

Technically I remain neutral at present but remaining wary of an 8-10% retracement in the US that would enable me to buy aggressively a market I am bullish for next few years. A close under 5440 in the ASX200 would switch me negative the local market short term.

Please note most trading and investing opportunities happen in under 5% of the time, in other words 3 weeks of the year, so patience / planning is vital. However, in the current choppy market I am likely to be more active than over recent years. Any questions please do not hesitate to contact us.

Watch for specific ideas in morning reports and Alerts when I transact. 


 

Potential Investing opportunities for the coming week

  • My stops on Ansell (ANN) are under $18.50, Flight Centre (FLT) under $45.15 for traders but I will add around $42 as an investor, M2 Communications (MTU) remains below $5.70 & Seven West Media (SWM) under $1.84.
  • I can buy Seek (SEK) around $15.50 with stops under $13.50.
  • I can buy Bank of Queensland (BOQ) around $11.30 with stops under $10.50.
  • I can buy Resmed (RMD) around $4.40 with stops under $4.
  • Gold lovers can buy Newcrest (NCM) around $11.20 targeting close to $15 with stops at $10.50 – good risk / reward.

Potential Trading for the coming week

  • After Friday’s surprising strength in the domestic market I want to sit on the sidelines for a few days but will become a seller if the ASX200 closes under 5440. 

 


A list of some sleepers are below, some have already started to show signs of life, we will look to continually add to this list over any weakness:

AWC, CSE, CSS, FXJ, KCN, KDL, LEI, & PEN. – I own the ones underlined.

Market Matters’ View at a glance

The below views are illustrated in detail by the charts beneath.

Bullish: ANN (m), CBA (m), CSL (m), Dow (m), Fairfax (m), IBEX (m), MTU (m), NASDAQ (m), Nikkei (m), OZL (m), RMD (w), SEK (m), S&P (m), SUN (m) & Vocus (w)

Neutral: AMP (w), ASX200 (d), Australian Banks (d) & (m), CWN (m), FMG (w), FTSE (w), Gold (w), Hang Seng (w), IBEX (w), Magellan (MFG) (w), NCM (m), NZ (m), REA (m), Retail Index (w), S&P (w), STOXX (w), TLS (m), WOW (m) & WPL (m).

Bearish: BOQ (d), BHP (m), China (m), Copper (m), Dax (w), NASDAQ (w), NZ (w), QBE (w), RIO (w) & WES (w).

• Time Frames - (d) = daily, (w) = weekly and (m) = monthly.

e.g. A (d) implies I am bullish on a daily basis but a (m) would mean I am bearish on a monthly / longer term basis.

 

Australian ASX200

I remain mildly bullish on a longer term basis, I will aggressively buy any decent pullback.

Chart 1 – ASX200 Monthly Chart 

Chart 2 – ASX200 Weekly Chart 

Chart 3 – ASX200 Weekly Chart 

Chart 4 – ASX200 Daily Chart 

Chart 5 – SPI (Share Price Index) Futures 60 mins Chart 

Chart 6 – Volatility Index VIX Weekly Chart

Chart 7 – The US 10 year Interest Rate Monthly Chart 

Chart 8 – New Zealand 50 Index Monthly Chart

American Equities

The American indices reached my sell levels in early March, the NASDAQ then proceeded to fall 8.7%. I now expect another 8-10% fall from the 3900 region that should commence soon, the Russell 2000 reached fresh 2014 highs recently and has already started falling. 

Chart 9 – Dow Jones Index Monthly Chart 

Chart 10 – Dow Jones Index Daily Chart 

Chart 11 – S&P 500 Monthly Chart 

Chart 12 – S&P 500 Weekly Chart 

Chart 13 – Russell 2000 Index Monthly Chart 

Chart 14 – NASDAQ Weekly Chart

 

European Indices

The DAX now looks very vulnerable and similar to the Russell 2000 / NASDAQ, with failure into current fresh highs my expectation.

Chart 15 – Euro Stoxx 50 Weekly Chart 

Chart 16 – FTSE Weekly Chart 

Chart 17 – Spanish IBEX Monthly Chart

Chart 18 – Spanish IBEX Weekly Chart 

Chart 19 – German Dax Monthly Chart

Asian Indices

Asian indices remain net positive, but messy short term. The Nikkei continues to be volatile and is now threatening a decent correction.
The China Index remains bearish long term with another +18% downside.

Chart 20 – Hang Seng Weekly Chart 

Chart 21 – China Shanghai Composite Monthly Chart 

Chart 22 – Japanese Nikkei 225 Monthly Chart

 

Australian Stocks

Buying sustainable yield and selling XJO calls has been a logical strategy over recent years. However, the risk of rising bond yields has resulted in me now recommending a more balanced portfolio. There is clearly no sign of this at present as financial stocks remain the backbone of the ASX200 and the Reserve Bank recently confirmed lower interest rates are here for a while.

Chart 23 – BHP Weekly Chart 

Chart 24 – BHP Daily Chart 

Chart 25 – Woodside (WPL) Monthly Chart 

Chart 26 – RIO Tinto (RIO) Weekly Chart 

Chart 27 – Fortescue Metals (FMG) Weekly Chart 

Chart 28 – Vale (US) Weekly Chart 

Chart 29 – Newcrest Mining (NCM) Monthly Chart 

Chart 30 - OZ Minerals (OZL) Monthly Chart 

Chart 31 – CBA Monthly Chart

Chart 32 – ANZ Bank (ANZ) Monthly Chart

Chart 33 – Westpac Bank (WBC) Weekly Chart

Chart 34 – National Bank (NAB) weekly Chart

Chart 35 – Macquarie Bank (MQG) weekly Chart 

Chart 36 – Bank of Queensland (BOQ) Weekly Chart 

Chart 37 – AMP Weekly Chart 

Chart 38 – Suncorp Group (SUN) Monthly Chart 

Chart 39 – Insurance Australia (IAG) Monthly Chart 

Chart 40 – QBE Insurance Monthly Chart

Chart 41 – Magellan Group (MFG) Weekly Chart 

Chart 42 – Wesfarmers Ltd (WES) Weekly Chart

Chart 43 – Woolworths Ltd (WOW) Monthly Chart

Chart 44 – Seek Ltd (SEK) Weekly Chart 

Chart 45 – Real Estate Australia Group Ltd (REA) Monthly Chart 

Chart 46 – Vocus Communications (VOC) Weekly Chart 

Chart 47 – Telstra (TLS) Monthly Chart 

Chart 48– M2 Group Ltd (MTU) Monthly Chart 

Chart 49 – Crown Resorts Ltd (CWN) Monthly Chart 

Chart 50– Ansell Ltd (ANN) Monthly Chart 

Chart 51– CSL Ltd (CSL) Monthly Chart 

Chart 52 Ramsay Healthcare (RHC) Monthly Chart 

Chart 53– Resmed (RMD) Weekly Chart 

Chart 54 Fairfax Media (FXJ) Monthly Chart 

Chart 55 – Seven West Media (SWM) Monthly 

Chart 56 Flight Centre (FLT) Monthly 

Chart 57– Australian Dollar (AUD) Weekly Chart

The $A is looking choppy and is currently having a good bounce, with the potential to challenge the 97c area.


Commodities

Gold rallied strongly recently moving me to 50-50 scenario that it may abc up towards 1400.

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

Iron Ore is plumbing 5 year lows but related stocks are pricing this area to hold.

Chart 58 – Gold Monthly Chart

Chart 59 – Copper Weekly Chart 

Chart 60 – Iron Ore Monthly

 

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

Have a great week,

Shawn Hickman
marketmatters.com.au

Reports and other documents published on this email (‘Reports’) are authored by Market Matters independently of Shaw Stockbroking Limited (‘Shaw’). The Reports represent the views of Market Matters and those views may be contrary to views expressed by Shaw, Shaw Research and Shaw advisers. The Hickman Report is 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.
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