Market Matters Report / Market Matters Weekend Report 25th September 2016

By Market Matters 25 September 16

Market Matters Weekend Report 25th September 2016

Market Matters Weekend Report 25th September 2016

Market Matters Weekend Report Sunday 25th September 2016
 
Overview
 
The ASX200 rallied extremely well last week swinging us from a short-term negative stance to a bullish one. While the ASX200 now looks likely to consolidate around the 5400 area for a few days the index is technically bullish while over 5300 and a close over 5485 will actually target a retest of 5600. The combined  efforts of the Fed and BOJ was enough to alleviate any short-term concerns of investors that interest rates were set to rise faster than anticipated, hence hurting the relative valuation of stocks. For us the big take out from both central bank meetings were the comments from Fed Chair Janet Yellen when she was asked if she is "worried about bubbles in the economy because of our prolonged low interest rates?" - her basic answer was "No, she isn't" and shortly afterwards the NASADAQ hit an all-time high.
 
" Asset valuations are not out of line with historical norms" - Janet Yellen, Chair of the Federal Reserve, last week.
 
The Federal Reserve publicly being comfortable with the S&P500 trading around the 2150-2200 level while they continue to attempt increased growth within their economy sends a clear message to markets. The Fed are not intending to implement any actions that harm asset prices short-term, it would simply undo all their hard work since the GFC in one extremely fast step and probably lead to a recession.
 
ASX200 Daily Chart
 
 
 
Technically we remain positive US stocks targeting ~8% further gains over coming months. The combination of Ms Yellen's comments / intentions and the high degree of negativity within the equity market makes us comfortable with our short-term outlook for US stocks which we have held for all of 2016.
 
However investors should also remember we are also targeting a ~20% correction after this final push from global stocks - hence we continue to wear our "sellers hat" with regard to our portfolio.
 
NYSE Composite Index Monthly Chart
 
 
 
The lack of sell signals from overseas stock markets enabled us to hold tight, while under significant pressure within our portfolio, as the ASX200 had a very nervous few weeks. Importantly the month of October is only a week away and it's the month where our most influential sector, the banks, statistically perform extremely well. As we have quoted previously if over the last 5-years you had bought CBA on the open of the 1st trading day of October and sold on the close of the last day the average return was +6.6% with all 5-years registering a positive return, the lowest 3.4% in 2012 and the highest an impressive 10.5% in 2011. There's a saying amongst seasoned professionals in Australia "The market cannot go down without the banks".
 
We remain extremely comfortable with both our short-term bullish local banking outlook and overweight bank position within our portfolio. The Australian Banking Index looks set to test the 8600 area i.e. 8% higher in 2016.
 
Australian Banking Index Monthly Chart
 
 
 
Last week Vocus (VOC) tested our nerves as the stock got attacked from two major angles. Firstly, TPG Telecom (TPM) came out with a downgrade to its forward guidance for 2017 sending the stock plumeting over 20% for the week, and not surprisingly dragging the whole sector with it. Secondly, VOC's CFO resigned creating major concerns as to whether issues existed within the business. We feel TPG's fall from grace was no surprise and we had flagged our thoughts over recent weeks plus the CFO resignation appears to be more about internal politics between M2 and VOC executuives as the merger is bedded down as opposed to inherent issues in the underlying business.
 
Hence we did not panic last week and would have been speculative buyers under $6 if we had been holding no position. However, we are currently looking to exit the poosition over coming weeks ideally back over $7.
 
Vocus (VOC) Weekly Chart
 
 

Standout technical chart of the week
 
RIO looks excellent for a strong rally towards $52 and potentially $55. Historically, this once in a decade recovery in resource stocks should last another 3-5 months. This obviously supports our view on RIO which we may trade via options, or stock next week, especially if it opens down early on Monday following the Dows 131-point decline Friday night.
 
**Watch for alerts**
 
RIO Tinto (RIO) Weekly Chart
 
 

Summary
 
After the central banks meetings last week we are back to a bullish short-term view but still believe the ASX200 has probably formed a major top at 5611 and hence will be looking for selling opportunities accordingly. We can still be buyers of banks into any weakness next week, prior to their seasonally strong October, and looming dividends in November.
 
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 set to open down ~20-points on Monday, a few days consolidation around the 5400 area looks likely.

Potential Investing opportunities for the coming week(s)

We are comfortable with our general asset allocation and will continue to reduce overall index exposure as decent opportunities present themselves.

Potential Trading opportunities for the coming week

We can buy 50-point dips in the ASX200 while the 5300 area holds and particularly like RIO over coming weeks.
 
Portfolio / Trade Holdings
 
The Market Matters Portfolio:
 
https://www.marketmatters.com.au/blog/post/market-matters-stock-positions-friday-16th-september-2016/

We are happily overweight the banking sector and are pleased to have recently increased our cash position to 11%.
 
Australian ASX200
 
The ASX200 again performed well last week closing over the pivotal 5400 area. A close over 5470 would be very bullish and considering the bullish seasonality for the banks in October it feels close at hand. Short-term the ASX200 needs to hold 5300 to maintain the positive bias.
                                                                                                                  
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 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


American indices remain bullish medium term targeting ~8% higher prices, the S&P500 should now hold the 2150 area. The NASDAQ, usually the "leading" US Index made fresh all-time highs last Thursday implying higher prices.

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, but the UK FTSE stands out as the bullish index as it benefits from a weaker pound post BREXIT.

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 Asian indices look ready for a few more weeks sideways choppy style price action.

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 recovered well last week and looks bullish while over 5300 - certainly more individual stocks look positive than negative.

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) Monthly 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 55 – Crown Resorts (CWN) Monthly 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 has struggled since 2011 falling ~30% against the $US as markets question the strength of the Australian economy post the commodities boom. A significant part of the recent bounce from the 68c area has been courtesy of a weaker $US. However the $US has regained some strength as higher rates for the US are slowly factored in by markets, we continue to eventually targeting the ~65c region but are 50-50 whether the $A can bounce to ~81c first.
 
The $US is 50-50 just here but a kick over 102 would complete a classic advance structure, currently the market is giving us no clues.
 


Chart 59b– The $US Index Monthly Chart


Commodities


Gold rallied very well from multi-year lows last December but it has reached our initial target area hence we remain short-term cautious.
 
Copper remains in a negative downtrend on a longer-term basis targeting prices over 20% lower.
 
We are now questioning our Crude Oil $US60/barrel target after recent weakness. A break back over $US51/barrel, basis December Crude, would reignite our bullish view.
 
Iron Ore has achieved our +$US70/tonne target, technically we remain now neutral / bearish until further development.

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 25/09/2016. 9:00AM.
 
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