Market Matters Report / Market Matters Weekend Report 10th October 2015

By Market Matters 10 October 15

Market Matters Weekend Report 10th October 2015

Market Matters Weekend Report 10th October 2015




The Bulls have charged hard for 8 days!

Good afternoon everyone!

Overview

Last week the ASX200 closed up a very impressive 227 points / 4.5% to 5280 as global equities mounted an aggressive recovery.

Market Matters is very pleased to have sent out its last 2 "buy the market alerts" at ~4950 and ~5075 respectively. In addition, our recent switch into Macquarie is looking excellent so it's time to get back on some of the more aggressive plays having called Santos higher but, unfortunately, not followed up with an alert.

The market has clearly been propelled higher by short covering / reallocation to the big underperformers of 2015 e.g. for the week - Fortescue +23%, BHP +13%, RIO +13% and Santos +42%.
Within the Market Matters portfolio this was also evident with ANZ and Bendigo up over 5% but the recently stronger CBA and Challenger up under 3%.

Importantly, last week was very strong without any major news following the previous week when equities rallied on bad news implying sentiment has changed. What comes next is the 'million dollar question"!

Turning to the Markets

So, let's give some thought to the current psychology in the market:

  • The majority of the "weak" shorts in resources / energy are likely to have covered their positions last week. This is evident from the "short position report" with Santos having dropped out of the 10% club (over 10% over market cap. shorted).
  • BHP has rallied $4.16 very quickly from $21.61 into technical resistance plus the last rally was $4.24. Usually a stock after this movement would at least consolidate prior to continuing with the advance. That said, none of the resources / energy stocks look vaguely bearish so surprises may remain with the recent uptrend.
  • Investors should remember it takes more than a week to unwind trades / positions that have taken years to establish and enjoy the results e.g. the short resources and long healthcare positions. Hence, in recent reports Market Matters has expected underperformance from the Healthcare sector and this has transpired, rallying only 1.6% last week.


Last week the banking sector rallied 5.6% led by Bank of Queensland (BOQ) after a solid report rising 10.7%. With ANZ, Westpac and NAB reporting soon this sector is ready for some more large moves.
Very importantly, the report for BOQ was solid but not exceptional which was enough to propel the stock higher adding weight to the risks being on the upside.

The retail sector looks similar to the Healthcare sector and likely to underperform in the short to medium term.

In October 2014, from the 13th, the ASX200 rallied over 8% into mid-November, basically 3 weeks with no down days.

This is seasonally an extremely strong period for equities and selling just because the market has rallied "too far" is very dangerous.

Short term, buying every 50 point retracement and adding to positions if the market then falls 80 points has been very successful - see chart 4.

Summary

Market Matters would expect the market to go up from here into at least mid-November based on past cycles with the big bank dividend kicking in during this period. At this point we would expect a pullback for another buying opportunity into Christmas.

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


What Matters this week

The ASX200 looks likely to open up down around 10-points on Monday after a quiet night overseas.

 


Potential Investing opportunities for the coming week

  • Market Matters advocates being fully invested with 7-8% cash for specific opportunities.

 

Potential Trading for the coming week

  • Short term we still believe the best trading action is to be long and add into any weakness.
  • After last week's gains from a risk / reward basis a few days consolidation in a few stocks would be ideal before buying.

  

 

Portfolio / Trade Holdings

Our portfolio had an excellent week outperforming the ASX200 with only ANN yet again letting the team down - the ASX200 gained 4.5%.

1. Ansell (ANN) -0.3% - medium term investment.

2. ANZ Bank (ANZ) +5.7% - medium term investment.

3. Bendigo Bank (BEN) +5.1% - medium term investment.

4. Challenger (CGF) +2.9% - medium term investment.

5. Commonwealth Bank (CBA) +2.9% - 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) +4.6% - medium term investment.

7. Macquarie (MQG) +6.1%- medium term investment.

8. Woodside (WPL) +10.3% - medium term investment.

 

  • Cash for future purchases ~7.5%.


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 Monthly Chart


Chart 7b – The German 10-year Interest Rate Quarterly Chart


American Equities

The American indices have recently experienced our anticipated correction, very sharply in August similar to 2011. Sideways price action was anticipated short term and this appears to be over.

  • The Dow exceeded predicted target and now looks very bullish.
  • The NASDAQ looks very bullish and set for fresh 2015 highs.
  • The more followed (by market observers and participants) S&P500 fell 2% short of our technical target but has now also started rallying strongly.


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 have completed a decent correction with the clearest leads recently 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 uncertainty in Chinese stock market and weakness / devaluation of the Yuan.

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 remain positive the “yield play” after its +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) Daily 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 45 – 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) Monthly Chart

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


Chart 59b– The $US Index Monthly Chart



Commodities

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,
From Richard and the Market Matters Team


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