Market Matters Report / Market Matters Weekend Report 10th April 2016

By Market Matters 10 April 16

Market Matters Weekend Report 10th April 2016

Market Matters Weekend Report 10th April 2016



For local stocks, April has started on the back foot with the ASX 200 off -2.85% month to date with -1.24% of the fall happening during the past week. The U.S on the other hand is off -0.38% month to date HOWEVER much of that out-performance was booked prior to last week.

Over the last week, the S&P 500 is off -1.20%, which is keeping pace with the declines in our market (and other global markets) – which is interesting. There has clearly been underlying support for U.S stocks over and above other markets since they made a low on the 11th February and have rallied more than 11% - pretty much unabated.

As we’ve been writing this week, it seems like that trend is starting to loss momentum and we’ve got increasing risks for a downside move in the U.S – which would put negative pressure on Aussie stocks.

US Equities

U.S stock markets are clearly losing momentum as we’ve often written about recently. Whether or not we’ll see one more high before they roll over is probably now about a 40% probability – which means our preference, has moved marginally towards an retracement from around current levels. The catalyst being  Q3 U.S earnings season which kicks off next week. 

Technically, the S&P 500 has had an inside week –a chart pattern which typically happens when a stock/sector/market or what ever it is, takes a breather from the primary trend or is in the early stages of a counter trend move. So this weeks range on the S&P 500 has happened within the high to low range of the previous week, and it’s corresponded with overall weakness in the market. If we consider that finally, the U’S market has traded inline with other markets, and stopped outperforming as it has been for some time now, it suggests that momentum is changing. 

Source; IRESS

Here’s the S&P 500 monthly chart we’ve been working off lately. Form a monthly perspective it still suggests one more high however we’re conscious of the signals we’ve outlined above and as is the case with a monthly chart, it obviously takes a lot longer for confirmation to be received.  

Australian Equities

This week the ASX 200 broke through the support region of 5000 with some conviction which prompted us to take a more negative stance and the 5000 level now becomes resistance. The Market Matters portfolio has increased to 39% cash.

Our concern lies in the recent resilience of the U.S market which is still just around 3.6% off its all-time high. There are obvious reasons for this relative strength however a market that defies gravity for such a long period time – as other global markets struggle, will eventually run into a catalyst that prompts selling.

As we’ve described during the week, that catalyst for the US market to pullback will likely be U.S earnings season. Firstly, because stock prices are going against earnings revisions (stocks up – earnings down) and secondly, because U.S corporates are buying back a lot of stock (on-market buy backs) and that has to stop before reporting starts....

If the American market pulls back, we doubt that Aussie stocks will pull back as hard or as far HOWEVER, we’ll still go lower and that will create opportunity for those who hold reasonably high cash levels

So, as was the case last week we remain in "sell mode" given our current views on the US Market. Fortunately, we’re already holding 39% cash so we can be more selective in what we part ways with and at this stage, we’re not in a huge rush.


  • Market Matters is less confident that the U.S market will make new all time highs before rolling over. We now think the U.S market will struggle from current levels as has been the case over the past week.
  • Whether or not it does make new highs, the upside potential seems disproportionality small relative to downside potential, thus increasing cash seems prudent   
  • This week, we increased cash in the Market Matters portfolio by selling Bendigo Bank (BEN) and Mirvac (MGR)


What Matters 

The ASX200 looks likely to open up around 20 points on Monday after a reasonable night on Wall Street on Friday

Potential Investing/Trading opportunities for the coming week

We are on the sell side of equities looking for a deeper pullback before going back into buying mode again. Patience is a virtue and it feels like it’s the time to sit rather than act
More active/sophisticated investors could look to short the market into strength that may play out early in the week

Portfolio/Trade Holdings

We sold Bendigo Bank (BEN) this week for a loss and Mirvac (MGR) for a slight profit to increase cash levels in the portfolio

· Cash position now up to ~39%.


Chart 1 – ASX200 Monthly Chart

Chart 2 – ASX200 Daily Chart

Chart 3 - SPI (Share Price Index) Futures 60 mins Chart

Chart 4 ASX200 Financials Index (excl. REIT's) Weekly Chart

Chart 5 Volatility Index VIX Weekly Chart

Chart 6 – The US 10-year Interest Rate Monthly Chart

Chart 7 – The German 2-year Interest Rate Monthly Chart

American Equities

Lost momentum during the week and traded inline with other global markets breaking their trend of outperformance. Signals are building that the U.S market will pullback from current levels  

Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Russell 3000 Weekly Chart

Chart 10 – 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

European Indices remain negative despite central bank support 

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

Asian & Emerging Markets Indices

Asian indices have actually started to look OK and supports our call for outperformance by the Australian market v the U.S in 2016

Chart 19 – Hang Seng Weekly Chart

Chart 20 – China Shanghai Composite Index Monthly Chart

Chart 21a – Emerging Markets MSCI ETF Weekly Chart

Chart 22 – Japanese Nikkei 225 Index Monthly Chart

Australian Stocks

Resources continued to outperform the broader market – largely because of significant weakness in the banks and better data from China. We think that theme will continue. Look for lower levels to once again move to the buy side 

Chart 23 – BHP Billiton (US) Monthly Chart

Chart 24 – BHP Billiton (BHP) Weekly Chart

Chart 25a – Woodside Petroleum (WPL) Monthly 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 – Newcrest Mining (NCM) Monthly Chart

Chart 29 – Regis Resources (RRL) Weekly Chart

Chart 30 – Northern Star Resources (NST) Weekly Chart

Chart 31 – Market Vectors Gold ETF Daily 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) Monthly Chart

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

Chart 38a – AMP Ltd (AMP) Weekly Chart

Chart 38b – Henderson Group (HGG) Daily 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 45b – REA Group Quarterly Chart

Chart 46 – Telstra Corp. (TLS) Monthly Chart

Chart 47 – Vocus Communications (VOC) Weekly Chart

Chart 48 – 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– Healthscope (HSO) 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) Monthly Chart

The bounce to +75c that we mentioned over recent weeks materialised, we remain 50-50 short term however given USD weakness, we would not be surprised to see the AUD test 80c

Chart 59b– The $US Index Monthly Chart


Similar commentary to last week….

Gold has recently rallied very well from multi year lows but may need a weaker USD to move any higher. We continue to think that if the USD breaks the bottom of its range (as per above) gold would most likely spike. 

Copper remains in a downtrend on a longer term basis 

Crude Oil has held the $US30/barrel area recently and staged a good 30% rally but major resistance ~US40/barrel is playing out. OPEC meet on 17th  April and will set the near term trend

We are now neutral Iron Ore after the explosive move to above $60 in recent weeks.

Chart 60 – Gold Monthly Chart

Chart 61 – Copper Monthly Chart

Chart 62 – Crude Oil Monthly Chart

Chart 63 – Iron Ore Monthly Chart

This report contains factual information and does not constitute financial advice. The information is not intended to imply any recommendation or opinion about any financial product.

Have a great week

The Market Matters Team
Level 12 28-34 O'Connell St
Sydney NSW 2000


All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 9/4/2016 5:00pm
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