Market Matters Report / Market Matters Weekend Report 23rd October 2016

By Market Matters 23 October 16

Market Matters Weekend Report 23rd October 2016

Market Matters Weekend Report 23rd October 2016


The ASX200 was very quiet as an index but extremely volatile on both the stock and sector level. October is unfolding almost exactly like the seasonal road map that we have painted over recent weeks hence until further notice this will remain our guide into November.

1. The banking sector is up 2.3% for October compared to the average of ~4% since the year 2000. Hence implying another 1.7% to go, with our target for market heavyweight CBA over $77.

2. The healthcare sector which usually outperforms noticeably in November / December is down a significant 4.5% in October which interestingly equals its average gain after October into Christmas.

We will continue to look for the ideal time to switch from part of our overweight banking position potentially into another healthcare stock - we allocated 5% of our portfolio into Healthscope on Friday.

We still have no doubt that a more active approach is the way ahead for the next 6 months, look at some of the following rallies / falls this year in the well known "blue chip" stocks:

1. Telstra (TLS) up 18% and down 16%.

2. CSL Ltd up 22% and down 21%.

3. NAB up and down 19%.

4. RIO up 46% and down 22%.

5. Westfield Property Trust up 22% and down 17%.

There are numerous examples in this current market of stocks showing a great profit on paper only to fall fast and that positive position evaporates before investors eyes.

NB We have not cherry picked these numbers there are some far more dramatic examples but we have deliberately chosen household names.

ASX200 Daily Chart

Last week we saw some large moves in different parts of the ASX200, largely on significant flow of news:

1. Tatts Group (TTS) rallied 15.1% on merger news with Tabcorp Holdings (TAH) who gained only 1%.

2. Crown (CWN) fell 15.7% and Star Entertainment (SGR) was down 10.8% on arrests in China of CWN staff linked to illegally marketing to "whale" style gamblers.

3. Healthscope tumbled 19.3% and Ramsay Healthcare 4.6% on news of low private hospital visits over recent months leading to downgrades of HSO future earnings. HSO was trading on a rich valuation due to anticipated future earnings growth which is now unlikely for this year at least.

4. The resources space was strong with S32 up 5.2%, BHP +5.2%, Fortescue +4.9% and Newcrest +5.2% as money flowed back into the sector after a recent pullback.

We are sticking with our original view on the gaming stocks for now which is simply "don't mess with the Chinese government". Longer term we do like exposure to the Chinese tourist for Australia and may consider SGR when / if it trades towards the $4.60 support area.

Star Entertainment Group (SGR) Weekly Chart

The healthcare sector was whacked almost 5% last week which gave us a very good opportunity to increase our exposure to this sector leading into Christmas. We allocated 5% of our portfolio into private hospital operator Healthscope (HSO) on Friday after it was hammered ~20% following some disappointing operational updates. However we are believers in the bigger picture for companies in this space, like Ramsay Healthcare (RHC) and HSO, believing that when the dust settles the 20% decline in HSO on Friday will prove to be an overreaction. Simply the Australian population is growing and people are living longer, hence increasing the requirement for healthcare. Short term ‘blips’ can often create very good medium term buying opportunities.

We will look at more health sector stocks for potential opportunities in morning report (s) next week.

Healthscope (HSO) Weekly Chart

As we said RHC was also sold down aggressively on Friday, actually being down 8.8% at one stage but finally closing down 5.9%. While we like RHC our exposure to HSO is enough for this specific space and a break back under $69 would be a major concern for RHC technically.

Ramsay Healthcare (RHC) Monthly Chart

The resources enjoyed a good week which was impressive considering that commodities were fairly flat and the $US was strong. The resource heavy Canadian stock market gained 2.4% to make fresh highs for 2016 implying strongly this resource strength has further to unfold. Trading opportunities may well arise in this sector over the coming weeks.

Our position is IGO had a good week rallying over 10% and we are still targeting over $4.50, another 7-8% higher.

Independence Group (IGO) Weekly Chart

Standout technical chart (s) of the week

We have been watching ANN over recent weeks as it has corrected over 10% from $24.90 and it feels very likely to enter our buy zone under $22 next week.

We are likely buyers of ANN under $22 with stops under $20.

Ansell Ltd (ANN) Monthly Chart


No change, we believe equities will continue to "climb the wall of worry" with US stocks less than 2.5% below their all-time high. Our view is this will continue for the next 3-6 months and investors should become more active than usual taking decent profits when they present themselves and considering stocks when they get hit hard.

US equities have reached fresh all-time highs, our strategy remains clearly defined - we are wearing our "Sellers Hat" looking to slowly lighten equities exposure into strength.

What Matters this week

The ASX200's is again set to open basically unchanged on Monday, we remain bullish but short-term remains tricky given the low volatility and very tight trading range that is prevailing.

Potential Investing opportunities for the coming week(s)

We are looking to switch from our overweight banking position to overweight the healthcare sector - see ANN in standout chart of the week.

Potential Trading opportunities for the coming week

We believe that the resources sector is poised for further gains and this is likely to the focus of our attention over coming weeks from a trading perspective.

* Watch out for investing alerts*

Portfolio / Trade Holdings

The Market Matters Portfolio:

We are happily overweight the banking sector but this is likely to be trimmed in the near future. We purchased Healthscope (HSO) on Friday after panic selling reducing our cash position to 9%. VOC remains our stand out concerning position.

Australian ASX200

The ASX200 had an extremely quiet week closing down just 4-points, we remain positive while it holds over 5350.

Chart 1 – ASX200 Monthly Chart

Chart 2 – ASX200 Weekly Chart

Chart 3 – ASX200 Daily Chart

Chart 4 - SPI (Share Price Index) Futures 60-min Chart

Chart 5a ASX200 Banking Index Monthly Chart

Chart 5b ASX200 Financials Index (excl. REIT's) Weekly Chart

Chart 6 Volatility (VIX) Index Weekly Chart

Interest Rates

Short-term interest rates in the US look ready to move significantly higher but we may see a few more weeks / months sideways action first.

Chart 7a – Australian 3-year bonds Weekly Chart

Chart 7b – The US 10-year Interest Rate Monthly Chart

Chart 7c – The US 2-year Interest Rate Monthly Chart

American Equities

Similar to our local market the US was very quiet last week with the Dow closing up just 7-points. American indices remain bullish medium term targeting ~6% higher prices, the S&P500 ideally will now hold the 2130 area.

Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Russell 3000 Weekly Chart

Chart 10a – US S&P500 Index Monthly Chart

Chart 10b – US S&P500 Index Daily Chart

Chart 10c – US S&P500 Banking Index Monthly Chart

Chart 10d – US S&P500 Healthcare Index Quarterly 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

Overall European indices are tricky and neutral, the UK FTSE continues to stand out as the bullish index as it benefits from a weaker pound post BREXIT but it has now reached major resistance. The other European Indices are gaining positive momentum.

Chart 15 – Euro Stoxx 50 Index Monthly 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

The Hang Seng and China indices look ready to rally after a few weeks sideways choppy style price action. The Emerging Markets still look set to pop 4-5% higher and the Japanese Nikkei still feels ready to "pop" to the upside.

Chart 19 – Hang Seng Weekly Chart

Chart 20 – China Shanghai Composite Index Weekly Chart

Chart 21a – Emerging Markets MSCI ETF Weekly Chart

Chart 22 – Japanese Nikkei 225 Index Monthly Chart

Australian Stocks

The Australian stock market had another very quiet week with some large sector movements i.e. Banks +1%, materials +1%, gaming stocks smacked, energy -1.1%, real estate -2.1% and healthcare -4.9%.

Chart 23 – BHP Billiton ADR ($US) Monthly Chart

Chart 24 – BHP Billiton (BHP) Weekly Chart

Chart 25a – Woodside Petroleum (WPL) Monthly Chart

Chart 25b – Origin Energy (ORG) Weekly Chart

Chart 25c – Oil Search (OSH) Weekly Chart

Chart 26 – RIO Tinto Ltd (RIO) Weekly Chart

Chart 27 – Fortescue Metals (FMG) Monthly Chart

Chart 27b – Independence Group (IGO) 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) Daily Chart

Chart 33 – ANZ Bank (ANZ) Weekly Chart

Chart 34 – Westpac Bank (WBC) Daily 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 38a – AMP Ltd (AMP) Monthly Chart

Chart 38b – Henderson Group (HGG) Weekly Chart

Chart 39a – Sydney Airports (SYD) Monthly Chart

Chart 39b – Mantra Group (MTR) Daily 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) Weekly Chart

Chart 45a – Seek Ltd (SEK) Monthly Chart

Chart 45b – REA Group (REA) 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

Chart 55a – Crown Resorts (CWN) Monthly Chart

Chart 55b – Star Entertainment (SGR) Weekly Chart

Chart 56– Bellamys (BAL) Weekly Chart

Chart 56b– Blackmore's (BKL) Monthly Chart

Chart 57– JB Hi-Fi (JBH) Monthly Chart

Chart 58– Harvey Norman (HVN) Monthly Chart

Chart 59a– Australian Dollar (AUD) Monthly Chart

The $A is very trickly at present, we continue to eventually target the ~65c region but short-term we "just" favour ongoing strength for the $A towards the 81c area.

The $US is 50-50 just here technically although we have a "Gut feel" positive bias, a kick over 102 would complete a classic advance structure.

Chart 59b– The $US Index Monthly Chart


Cracks appeared in gold recently as it fell ~US60/oz and a pullback towards $US1200/oz support cannot be ruled out, however, it is performing ok considering the recent $US strength.

Copper remains in a negative downtrend on a longer-term basis targeting prices over 20% lower.

Our target for Crude Oil of +$US60/barrel again looks on track after recent OPEC meeting.

Iron Ore has achieved our +$US70/tonne target, technically we remain neutral but a potential "abc" target of ~$US80/tonne has raised its head.

Chart 60 – Gold Monthly Chart

Chart 61 – Copper Monthly Chart

Chart 62 – Crude Oil Monthly Chart

Chart 63 – Iron Ore Monthly Chart

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 21/10/2016. 4:30PM.
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