Market Matters Report / Market Matters Weekend Report 17th October 2015

By Market Matters 17 October 15

Market Matters Weekend Report 17th October 2015

Market Matters Weekend Report 17th October 2015

 

The calm before the storm perhaps?

Welcome to a glorious weekend!

Overview

Last week the ASX200 consolidated the previous week’s strong gains following the same trend as its overseas counterparts. Equity markets continue to follow the anticipated seasonal path which, pleasingly, points higher into Christmas.

Locally, next week Westpac returns to the trading arena after its capital raising plus ANZ reports on Thursday; both of these events could potentially dictate the direction of banks in the short term - a major part of the local market!

Importantly Bank of Queensland (BOQ) has now rallied 15% since its solid report 9 days ago - is the path of least resistance now up for Australian banks? On Friday, ANZ closed 23% below its April 2015 high. If you consider what happened with BOQ how will ANZ rally on a solid, let alone an excellent, report next week?

This week's thought "the calm before the storm" is potentially in reverse to the usual interpretation; the storm may be on the upside if ANZ reports well and the market is clearly nervous.


Turning to the Markets

Relatively short term trading / investing is generally unnecessary BUT the October-December seasonal strength is extremely reliable!

Both the technical and seasonal indicators are very well aligned pointing to a happy Christmas for stock market investors after a very tough year - the ASX200 is -2.6% to date in 2015 (not as bad as it feels).

After a recent solid advance the S&P500 looks ready for 3-4% pullback prior to further gains; however, day to day the ASX200 is running its own race at present.

Further consolidation / weakness locally back towards 5150 for the ASX200 prior to ANZ's report later in the week would not surprise.

Some specific thoughts:

  • Our preferred gold stocks Regis and Northern Star resources have rallied very well. As readers know Market Matters was bullish these stocks at a time when nobody was interested in them; however, we now think it is time to take profits when everyone seems to love them.
  •  The trend in gold remains down and the recent relief rally would historically come under pressure if the $US regains its strength.
  • The $A has recently rallied almost 5c against the $US in an almost stealth like manner, the sentiment became so negative around 69c there was probably nobody left to sell short term.
  • The bounce in the $A has caused some weakness to the $US earners e.g. over the last 5 days - Amcor -2%, Brambles -1%, CSL -2% and QBE -2.2%.
  • The overall trend in the $A is clearly down and currently supported by weak local fundamentals.
  • Market Matters thinks that the $A will soon resume its descent and that when it does the above stocks will become highly sought after once again.

Summary:

Medium term our view of the markets remains unchanged. Market Matters remains bullish into the Christmas period. Short term we anticipate the market having a brief pullback that will provide the final strong and well-positioned buying opportunity before the Christmas rally gathers real momentum.

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

What Matters this week

The ASX200 looks likely to open unchanged on Monday after a relatively 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, ideally ~ 5160 area on the ASX200.
  • After recent gains from a risk / reward basis a few more days’ consolidation in a few stocks would be ideal before buying.


Portfolio / Trade Holdings

Our portfolio had an excellent week outperforming the ASX200 with ANN finally leading the way - the ASX200 fell a slight 0.2%.

1. Ansell (ANN) +7% - medium term investment.

2. ANZ Bank (ANZ) +0.7% - medium term investment.

3. Bendigo Bank (BEN) +0.1% - medium term investment.

4. Bank of Queensland (BOQ) +3.4% - medium term investment.

5. Challenger (CGF) +2.4% - medium term investment.

6. Commonwealth Bank (CBA) +1.35% - long term investment.

7. Seek (SEK) +1.4% - medium term investment.

8. Macquarie (MQG) +1.9%- medium term investment.

9. Oil Search (OSH) -3.3% - short / medium term trade.

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

  • The Dow exceeded predicted target and now looks very bullish targeting 18,750-19,000 area.
  • 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.
  • Short term a pullback from the ~2030 area towards 1950-1975 is a strong possibility.

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

Been in suspense due to Capital Raising.

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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