Market Matters Report / Market Matters Weekend Report Saturday 13th February 2016

By Market Matters 13 February 16

Market Matters Weekend Report Saturday 13th February 2016

Market Matters Weekend Report Saturday 13th February 2016

Market Matters’ Weekend Report

Hello everyone and welcome to what is certainly a glorious Saturday here in Sydney.

Overview

Well, another extremely volatile week is behind us but, interestingly, after all the big one-day swings the S&P500 has closed down only 0.8% for the week. US equities rallied ~2% last night, again following oil which soared over 12% - we see another 20% upside in oil from current levels!

The S&P500 has unfolded exactly as anticipated in last weekend's report i.e. one final low under 1812 followed by a strong rally. The chart below illustrates the long-term position of the S&P500 where it has just experienced a 15.2% correction which is quite similar in size to the 2011 correction.

If the market is going to stay in tune with other classic historical bull markets, we should now see an advance to fresh all-time highs - this is extremely hard to envisage at present.


Conversely, the ASX200 was down an aggressive 4.2% last week, led by the banking sector which fell a whopping 9.5%. It should be noted that the banks are now over 30% of Australia's top 100 stocks, hence their huge negative impact on the index.

As a result of the above, Bank yields are now very attractive, between 5.7% ff for CBA and 8.1% ff for ANZ.

The recent significant blowout in domestic and global credit spreads has inflicted significant damage on our market, especially the banks as the fear of significant increases in loan defaults impacts perceptions of future profits. The increased capital raisings completed last year by Australia’s banks place our banks among the strongest in the world.

As a slight aside, some readers may have noticed Sweden reducing their ‘official rate’ to -0.5% but don't expect much of any rate cuts here to be passed on to the man in the street!

Over the last year the average cost of local corporate debt has risen from 3.5% to 4.5%, this clearly hurts a company’s profitability.

Turning to the Markets

As mentioned above, Market Matters is bullish oil at current levels looking for at least another 20% appreciation towards $38/barrel, with the outside chance of much higher.

A very encouraging sign for the local energy stocks is that on Friday the sector closed 7.5% above its 2016 lows, even as the broader market continued to be sold down and oil teetered around multi-year lows.

BHP rallied strongly overseas, aided by both the oil price and US equities, looking to open ~$16 on Monday i.e. a 5.7% gain.




As we have said before markets are often cyclical; driven by "Fear and Greed" on a short term basis; longer term a company's performance will always determine its shares performance. Mid last year everybody loved banks but now they have corrected over 30% they are the burden of most investors portfolio's - including ours!

It was not long ago that everybody hated gold stocks and QANTAS now they are top performers.

Market Matters believes that stocks with a large correlation to the Emerging Markets Index will be the best place to be invested over coming months.

For example, we still like BHP for a rally towards $18 with stops at $15.

Standout technical chart of the week

We have featured the Emerging Markets Index before in recent months but it looks poised to rally over 20% towards the $36 area.

If we compare the pattern with the Gold Market Vectors chart, which has rallied ~50% in literally a few weeks, the correlation is excellent.



Summary

  • We are now bullish US equities with stops under last week's lows.
  • We are especially bullish local stocks with a correlation to the Emerging Markets Index i.e. Resources and Energy.


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

What Matters this week

The ASX200 looks likely to open up around 75 points on Monday after Fridays 313 point rally by the Dow.

Potential Investing opportunities for the coming week

We are bullish US equities from current levels with stops under last week's low. Hence stocks like Magellan can bounce ~10% with a stop also beneath their low of last week.


Potential Trading opportunities for the coming week

We’re bullish resources for coming weeks. BHP is a buy under $16 targeting ~$18 with stops at $15.30 i.e. good 3-1 risk / reward.

Portfolio / Trade Holdings

The Market Matters portfolio had a tough week like most investors with Ansell the best performer rallying 13% but the banks continue to disappoint. We also entered Henderson Group (HGG) a few days early and the stock may not be a long term position after its recent report. - the ASX200 was down 4.4% for the week.


https://www.marketmatters.com.au/blog/post/market-matters-portfolio-wednesday-10-february-2016/

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 2-year Interest Rate Monthly Chart


American Equities

The American indices have experienced a technical back flip down this week and look to be following the Russell 2000 below recent lows:

· The Dow is the only index that now looks 50-50 whether August low will hold as it achieved its wave symmetry target last year.

· The NASDAQ's wave symmetry target is ~3500 i.e. a massive 12% lower.

· The S&P500's technical retracement target is ~1800 i.e. 4% lower.

· The other main US Indices may have reached their retracement objectives.


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 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 have struggled over recent months, since the ECB disappointment.

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



Asian & Emerging Markets Indices

Asian indices will be quiet or closed this week due to Chinese New Year.

Chart 19 – Hang Seng Weekly Chart


Chart 20 – China Shanghai Composite Index Monthly Chart


Chart 21a – Emerging Markets MSCI ETF Weekly Chart


Chart 22 – Japanese Nikkei 225 Index Monthly Chart



Australian Stocks

Stocks with sustainable yield, offshore earnings and healthcare in general have been standout sectors over recent times but some resource stocks are now looking interesting.

Chart 23 – BHP Billiton (US) Monthly Chart


Chart 24 – BHP Billiton (BHP) Monthly Chart


Chart 25a – Woodside Petroleum (WPL) Monthly 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 – Newcrest Mining (NCM) Monthly Chart


Chart 29 – Regis Resources (RRL) Weekly Chart


Chart 30 – Northern Star Resources (NST) Weekly Chart


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


Chart 31b – Market Vectors Gold ETF Daily Chart


Chart 32a – Commonwealth Bank (CBA) Quarterly Chart


Chart 32b – Commonwealth Bank (CBA) Monthly Chart


Chart 33a – ANZ Bank (ANZ) Monthly 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) Monthly 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 45a – Seek Ltd (SEK) Monthly Chart


Chart 45b – REA Group 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 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 major technical support down ~60c.


Chart 59b– The $US Index Monthly Chart



Commodities

Gold has recently rallied very well from multi year lows.

Copper remains in a downtrend 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.

Crude Oil has held the $US30/barrel area recently but has not managed to rally.

Iron Ore remains close to multi-year lows and like Crude Oil has so far failed to achieve any meaningful bounce.

Chart 60 – Gold Monthly Chart

Chart 61 – Copper Monthly Chart

Chart 62 – Crude Oil Monthly Chart


Chart 63 – Iron Ore Monthly Chart


This report contains factual information and does not constitute financial advice. The information is not intended to imply any recommendation or opinion about any financial product.

Have a great week, from Richard and the Market Matters team


Reports and other documents published on this website (‘Reports’) are authored by Market Matters. The MarketMatters Reports are based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is, or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position. The Reports contain general, as opposed to personal, advice. That means they are prepared for multiple distribution without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of a financial advisor. The Reports are published by MarketMatters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports. If you rely on a Report, you do so at your own risk. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence.