Market Matters Report / Market Matters Weekend Report 24th October 2015

By Market Matters 24 October 15

Market Matters Weekend Report 24th October 2015

Market Matters Weekend Report 24th October 2015



Be happy, the market’s rallied 8.8% in four weeks!

Overview

Last week the ASX200 continued with its recent strength closing on Friday 8.8% above the panic lows of the 29th September. The US has been even stronger rallying over 11% since the recent August plunge to, amazingly, be only 2.9% below the all-time highs of 2015 AND actually up 2.8% for the year!

Unfortunately, the ASX200 is still 12% below this year's high, down 1.1% since the beginning of 2015, with the banks and oil stocks the main contributors to the weakness.

We are in a seasonally very strong period for equities and optimism has clearly returned with a vengeance.

Market Matters still expects a run up into the end of this year /early 2016 and stay basically fully invested before we reassess our overall portfolio structures.

Turning to the Markets

This week's strength has been helped significantly by Central Bank stimulus with:
1. the ECB on Thursday strongly hinting at yet further stimulus;

2. last night China cutting rates for the 6th time since November (in turn giving extra impetus to the US markets over night);

3. optimism for further stimulus from the Bank of Japan on Friday; and

4. potential for a rate cut locally on Melbourne Cup Day!


Some large company results were a big positive on Friday with Microsoft surging 10% and Amazon 6.2%.

With Australian banks reporting soon, will they follow BOQ’s lead and rally after results are released? For the ASX200 to have any potential to reach the 6000 level the banks will need to rally hard. The thought of more "free / cheap money" hitting the system has certainly helped the banks outperform and as they have started raising their own rates for borrowers to offset damage to their profitability resulting from APRA’s recent tightening of lending requirements.

The diversified Financial sector was the best sector for the week rallying 3.4% with Challenger (CGF) only 8c away from 10 year highs.

We also had two further pieces of corporate activity in the energy sector; will this push Woodside (WPL) to raise its bid for Oil Search?

Monday’s report will look at 3 stocks that look exciting for a Christmas rally and offer good risk / reward.

Chart of the week

Suncorp (SUN) $13.30 is an excellent chart pattern targeting a minimum 15% appreciation from Friday’s close; see chart 40.

Summary:

Market Matters is very comfortable with its view on the equity markets together with its current portfolio of investments. We will continue to look for additional investment and trading opportunities as they arise over the next few months.

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

What Matters this week

The ASX200 looks likely to open up around 50 points following strong gains in overseas markets and euphoria around Friday nights rate cut by China.

 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 ~ 5300 area on the ASX200.

 

Portfolio / Trade Holdings

Market Matters portfolio had a solid week matching the strong ASX200 with CGF leading the way - the ASX200 rallied 1.6%.

1. Ansell (ANN) unch. - medium term investment.

2. ANZ Bank (ANZ) +0.8% - medium term investment.

3. Bendigo Bank (BEN) +2.6% - medium term investment.

4. Bank of Queensland (BOQ) +2.4% - medium term investment.

5. Challenger (CGF) +7.3% - medium term investment.

6. Commonwealth Bank (CBA) +1% - long term investment.

7. Seek (SEK) -0.6% - medium term investment.

8. Macquarie (MQG) +1%- medium term investment.

9. Oil Search (OSH) +0.7% - short / medium term trade.


· Cash for future purchases ~7.5%.


Australian ASX200

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. Very quickly the S&P500 is only 2.9% below its all time high!

  • 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.


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, German DAX 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.

The reaction to Friday nights interest rate cut in China will be interesting next week.

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 a bounce similar to the one in April targets ~75c.


Chart 59b– The $US Index Monthly Chart



Commodities

Gold is tricky at present as it approaches $US1200/oz resistance.

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. Technically 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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