Market Matters Report / Market Matters Weekend Report Saturday 11th July 2015

By Market Matters 11 July 15

Market Matters Weekend Report Saturday 11th July 2015

Market Matters Weekend Report Saturday 11th July 2015

Afternoon All,

The ASX200 continued its recent highly volatile state with the average daily range for September SPI futures this week an astonishing 87 points (~1.5%). However, considering what we have recently witnessed from both Greece and China this has been a solid performance from the ASX200, to be down less than 1%. We feel the market is starting to represent fair value around the 5400 level, note we are not saying it's cheap or a "screaming buy". The overall resilience of the local market is not surprising when we stand back and look at the position of a few major contributors to the ASX200:

• The ASX closed on Friday 5.3% above our targeted 5200 area but 8.4% below the highs of 2015.
• The large cap resources have been smacked this year with BHP down 24%, RIO 16% and FMG 58% BUT they are now in areas of major support with a significant amount of awful news built into prices.
• The major supermarkets WOW and WES have corrected $12.30 (31%) and $8.51 (18%) respectively BUT we feel they have only a few dollars left on the downside and again, significant bad news is built into the price.
• The banks are currently our largest concern in the local market, as a whole they have corrected 18% to date but if bond yields continue to rise we can see another 7-8% downside from Fridays closing level - see last week's Morning Report on banks / bond yields.
• Also the market feels understandably positioned very long Australian stocks with $US earnings, we feel this trade may be in the process of a decent correction leading to quality buying opportunities.

When combining the above thoughts, our conclusion is the market is at a short-term countertrend inflexion point, the opposite to our view of the last 18 months:

1. Resource stocks feel ready to outperform banks for a few weeks / months.
2. Major supermarkets are likely to outperform stocks with $US earnings over coming weeks / months.

We hate to use "buts" when making our calls on the market BUT clearly China must be watched very carefully for the above MAJOR countertrend views to fold.

If traders and investors can position themselves at or around inflexion points the results can be extremely exciting:

Last week we purchased FMG calls basis $1.61 in the stock, yesterday the stock closed at $1.815, up 12.7% and the options are currently making over 50%.

Our views at a glance:

1. US equities will correct 10-15% in the relatively near future.
2. There are no reasons for traders / investors to buy Australian resource stocks at present.
3. Commonwealth Bank (CBA) will trade between $75 and $95 over coming 12-18 months – very useful for option sellers.
4. I am an accumulator of any fresh lows in 2015 by Australian banks. Short-term their bounce may be close to completion.
5. For the first time in over 6 months we can see Woolworths (WOW) outperforming Wesfarmers (WES).

Clarifying potential stocks currently on our shopping list for coming weeks / months.

· Investing - ANZ, AMC, CBA, CSL, MQG, MTU, RHC and TLS.
· Trading - RRL & STO.
Any subscribers not familiar with codes or companies can check these on the ASX website: http://www.asx.com.au/ - See charts of all below.

Summary:

No major change here:

1. We will remain patient on further purchases but now have our buyer hat in place.

2. We continue to have no interest investing in the resources sector but trading opportunities are now are now being targeted.

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

What Matters this week

The ASX200 looks likely to open up around 30-points on Monday.


Potential Investing opportunities for the coming week

· Hopefully investors are now sitting on a decent cash position awaiting buying opportunities – see above.
AMC around the $13 area feels the most likely purchase.

Potential Trading for the coming week

· Short term we are still looking for short term selling opportunities, especially if the banks are going to struggle.
· For aggressive traders / investors we are long FMG / MYR and Regis Resources (RRL) is being watched carefully.



Portfolio / Trade Holdings

Our portfolio had a relatively poor week, not matching the overall market, the ASX200 fell 0.75%.

1. Bank of Queensland (BOQ) -0.79% - medium term investment.
1. Challenger (CGF) -1.6% - medium term investment.
2. Commonwealth Bank (CBA) -1.0% - long term Investment.
3. Mirvac (MGR) +0.3% - medium term investment.
4. Seek (SEK) +0.2% - medium term investment.
5. Vocus (VOC) -4.6%- Medium term investment.

• Fortescue (FMG) October 1.75 Calls - Trade.
• Myer (MYR) - Trade.

• Cash for future purchases, ~30%.

Australian ASX200

I continue to look to spread my portfolio into more growth and offshore earning stocks going forward but importantly with patience.

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 REIT Index Monthly Chart

Chart 5b ASX200 Banking Index Monthly 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 continue to show signs of a topping pattern for 2015.

Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Dow Jones Index Daily Chart

Chart 10 – US S&P500 Index Monthly 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

European Indices feel to be in the middle of a decent correction with clearest leads coming from the UK 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 – Greek Stock market Weekly Chart

Asian indices have been extremely volatile over recent weeks on the back of a plunging Chinese market, we believe this represents a good long term, albeit aggressive, buying opportunity.

Chart 20 – Hang Seng Weekly Chart

Chart 21 – China Shanghai Composite Index Monthly Chart

Chart 22 – Japanese Nikkei 225 Index Monthly Chart


Australian Stocks

Quality stocks with sustainable yield have been standouts but some industrial stocks are now looking better. I no longer am a net seller of the “yield play” after its 15-20% correction and looking to invest in growth / yield stocks BUT not resources. However, I am no longer bearish the resources sector from a risk / reward perspective.

Chart 23 – BHP Billiton (US) Monthly Chart

Chart 24 – BHP Billiton (BHP) Weekly Chart

Chart 25 – Woodside Petroleum (WPL) Monthly Chart

Chart 25b – Santos (STO) Weekly Chart

Chart 26 – RIO Tinto (RIO) Weekly Chart

Chart 27 – Fortescue Metals (FMG) Weekly Chart

Chart 28 – Vale (US) Weekly Chart

Chart 29 – Newcrest Mining (NCM) Monthly Chart

Chart 30 – Regis Resources (RRL) Weekly Chart

Chart 31 – Barrick Gold Corp. (US) Monthly Chart

Chart 32 – Commonwealth Bank (CBA) Quarterly Chart

Chart 33 – ANZ Bank (ANZ) Monthly Chart

Chart 33b – ANZ Bank (ANZ) Daily Chart

Chart 34 – Westpac Bank (WBC) Weekly Chart

Chart 34b – Westpac Bank (WBC) Daily Chart

Chart 35 – National Australia Bank (NAB) Weekly Chart

Chart 36 – Macquarie Group (MQG) Monthly Chart

Chart 37 – Bank of Queensland (BOQ) Weekly 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 59– Australian Dollar (AUD) Weekly Chart

The $A continues to decline with an ultimate technical target now well under 70c.


Commodities

I am now neutral Gold as rising interest rates could easily derail the recent strength. I have divergence between the stocks and precious metal.

Copper remains very negative on a longer term basis, a very similar chart pattern to Newcrest Mining (NCM) and unfortunately we all saw what happened there.

Crude Oil has bounced as anticipated; I still expect renewed weakness over coming months.

Iron Ore looks positive now for a countertrend bounce.

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,

MarketMatters Team

 


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The author holds an interest in the financial products of ANN, BOQ, CBA, CGF, MGR, MYR, SEK & VOC.