Market Matters Report / Market Matters Weekend Report 31st October 2015

By Market Matters 31 October 15

Market Matters Weekend Report 31st October 2015

Market Matters Weekend Report   31st  October 2015




Happy Halloween!!

Overview

Last week the ASX200 struggled badly falling 2% while its rivals overseas were basically unchanged. Nevertheless October still remained a solid "bear breaker" rallying 3.7% locally while overseas the Dow was up a whopping 8.5%!

The main damage to the ASX200 last week was inflicted by a handful of major big-cap household names - NAB -7%, ANZ -5.8%, BHP -6.4%, Newcrest -11%, Fortescue - 19%, Woodside - 4.8%, Wesfarmers (Coles) - 5.4% and Woolworths - 13.3%. The highly concentrated construction of the ASX200 makes it very hard on the index when a few of the heavyweights fall; remember, 33% of the market is made up by just 5 stocks and 46% by the top 9!

Within these dominating parts of the index, 3 of the top 5, and 5 of the top 9, are included in the stocks identified above which were hit very hard last week and in turn caused the underperformance in the ASX200 - all this considered -2% was not too bad.

Further afield, China’s one child policy was lifted last week although this is not as dramatic as it sounds because the policy had already been significantly relaxed. Prior to last week if either of a married couple were the only chid (a significant %) they could already have two children, hence markets’ small reaction to the news. Rumours had been rife that China would abandon the policy at its next five-year plan meeting adding to the mooted response. Nevertheless, it’s estimated an extra 3-6 million babies will be born per year, on top of the current 16.5m annually!

Unsurprisingly, shares in the makers of nappies, pushchairs, and baby milk companies rallied but while it was not great news for the makers of condoms, Ansell (ANN) was still up 2% for the week.
Overall, the stocks that will benefit most will likely be offshore rather than domestic based, eg Kiwi baby formula makers.


Turning to the Markets

  • Market Matters has been bullish looking for a classic seasonal Christmas rally into a likely top in early January; the US and European markets are currently following the script perfectly.
  • However, the ASX200 clearly had the "wobbles" last week focusing on the poor corporate news from four of our top 10 companies - ANZ, NAB, WES and WOW.
  • Technically the short term weakness looks to have further to go with another 70-80 points fall in the ASX200 a strong possibility - see chart 4.
  • The main theme when we look at some of these heavyweight stocks is that we could easily see fresh lows for, in particular, ANZ, BHP and WOW however this will be into very strong support levels and therefore unlikely to see further acceleration down. Should the ASX200 reach our long targeted support levels of 5100 /5150 we would see this as an excellent buying area.
  • Conversely $US earners (e.g. Amcor and QBE) are looking excellent at present with the correction in the A$ now likely over and a move sub $0.70 under way.
  • The gold sector hit recent targets and from a risk / reward perspective we are neutral here at best; plus Newcrest (NCM) looks technically awful.
  • Fortescue (FMG) was hammered last week by almost 20% after reaching our targets and a fall to new lows around $1.50 would now not surprise.


Chart of the week

Westfield Corp (WFD) $10.25....This stock looks technically very strong looking for a move to new recent highs with current target around $11.40 - see chart 49.

Summary:

Overall Market Matters remains bullish looking for a Christmas rally. Current weakness in our market will keep us on our toes with the overall sluggish nature of the ASX200 perhaps tempering our overall target levels for the anticipated January high.

 

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

What Matters this week

The ASX200 looks likely to open up 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 a buyer of the ASX200 around 5175.
            • Trading stocks that look good at present remain OSH and STO in the oil sector.

 Portfolio / Trade Holdings


Market Matters portfolio had an ‘ok' week matching the weak ASX200 with OSH, MQG and ANN offsetting the weak banks - the ASX200 fell 2.1%.

1. Ansell (ANN) +2.1% - medium term investment.

2. ANZ Bank (ANZ) -5.8% - medium term investment.

3. Bendigo Bank (BEN) unch. - medium term investment.

4. Bank of Queensland (BOQ) -3.5% - medium term investment - also went ex-dividend.

5. Commonwealth Bank (CBA) -0.8% - long term investment.

6. Seek (SEK) -0.8% - medium term investment.

7. Suncorp (SUN) -1.4% - medium term investment.

8. Macquarie (MQG) +3%- medium term investment.

9. Oil Search (OSH) +5.4% - 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. The S&P500 rallied very quickly and is only 2.7% 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 during its pullback 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. Last Fridays interest rate cut in China failed to excite the equities this 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 has rejected strongly the $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 in August 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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