Market Matters Report / Market Matters Weekend Report Saturday 19th March 2016

By Market Matters 19 March 16

Market Matters Weekend Report Saturday 19th March 2016

Market Matters Weekend Report Saturday 19th March 2016

Market Matters Weekend Report


Overview

World equities, and especially the US S&P500 has enjoyed one of the most dramatic turnarounds that investors have ever experienced following the worst ever start to a calendar year.  The Dow has rallied 12% in only 24 days, recently aided by the Fed suggesting interest rates will increase at a slower pace than anticipated.

The advance has been led by the battered sectors of recent years with the combined energy and raw materials sectors advancing an impressive 16% over recent weeks.

The S&P500 is now amazingly only 4% away from it all time high of mid 2015.

Market Matters remains bullish targeting fresh all time highs in coming months BUT the S&P has reached resistance ~2050 and short term we feel a decent pullback is highly likely.
Friday was "Triple Witching" in the US when stock market futures, stock market index options and stock options all expire - importantly we often see market reversals after this quarterly event.

 

 


Similarly the ASX200 has rebounded over 10% since the panic sell off triggered by China concerns in mid February.
Over the last 6 months the local market has averaged a range of 385 points targeting ~5250 this month.

Hence having reached 5216 on Friday the upside feels very limited over the next 2 weeks and we can see a pullback towards 5100 short term.

We remain in "sell mode" but anticipate slightly higher prices in most sectors before significantly reducing our equities exposure - note we have already commenced slowly increasing our cash position.

Ideally the market will rally towards the 5300 area in early April prior to turning back down as people start thinking of "sell in May and go away!"

 

The large banking sector continues to lead the recovery locally after a horrible 12 months rallying 1.8% last week compared to the markets 0.3% gain

Overall the banking sector looks to have further upside but interestingly on Friday the highly correlated UK FTSE and Canadian S&P fell, while the Dow rallied, making us wonder if the ASX200 will experience selling pressure on Monday.

Our main concern from the local market short term is with the resources sector as the bounce in Emerging Markets approaches our target area.
Recently we witnessed a record volume spike in the mining ETF which is a concern implying that at the very best the majority of this recovery in resource stocks is complete.

We are pleased to have realised profits from BHP, FMG and RIO recently but will be watching our foray into RRL very closely.

There has been a large increase in gold speculative positioning implying the next move may be a continuation of the recent correction within the sector prior to further gains - not good news for RRL.


Standout technical chart of the week

BHP in US dollar terms has reached our retracement target area and we now expect sideways action between $US19 and $US30.
Short term the bounce in oil may be complete and we are 50-50 just here, combined with the negative set up from RIO causes us concern for BHP.
Hence we are now neutral - negative BHP for the next 3-6 months.

 

 



Summary


No change to our views from last week:

1. Market Matters remains short term bullish targeting 5250-5300 area for the ASX200, but these levels continue to approach fast.
2. We are in "sell mode" looking to continue increasing our cash position over weeks ahead - now over 25%.
3. US equities remain bullish targeting fresh all-time highs +4% but some consolidation is now overdue.
4. For the foreseeable future we are no longer interested in speculating with resource stocks.

 

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

 

What Matters this week

The ASX200 looks likely to open up around 20 points on Monday after a solid night on Wall Street.

Potential Investing opportunities for the coming week

• Continue to reduce equities exposure into current strength.
• Sophisticated investors may also consider selling calls at current levels against portfolios.

Potential Trading opportunities for the coming week

• Sell early on Monday into strength, run stops on the ASX200 at 5230 BUT if stopped renter shorts back under the lows of the week.


Portfolio / Trade Holdings

The Market Matters

https://www.marketmatters.com.au/blog/post/market-matters-portfolio-thursday-3-march-2016


· Cash position is now up to ~27%.


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 now look bullish actually targeting fresh all time highs in 2016, a break under 16,750 is required to turn this view negative.

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 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
European Indices have been sparked back into life last week by Mario Draghi's (ECB) bazooka but they continue to noticeably underperform the US.
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 have regained some stability and the recent strength of other world indices. However the Emerging Markets Index remains mildly bullish targeting a further 5-6% rally from current levels if it can hold over last week's lows.
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
Resource stocks continue to enjoy the strong counter-trend rally that we anticipated. Banks rallied strongly last week as investors went searching for "cheap" stocks.
Chart 23 – BHP Billiton (US) Monthly Chart

Chart 24 – BHP Billiton (BHP) Weekly 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 – Market Vectors Gold ETF Daily Chart 

Chart 32a – Commonwealth Bank (CBA) Quarterly Chart

Chart 32b – Commonwealth Bank (CBA) Monthly Chart

Chart 33 – 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 38a – AMP Ltd (AMP) Weekly Chart

Chart 38b – Henderson Group (HGG) Daily 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, the bounce to +75c that we mentioned over recent weeks has materialised, we are now 50-50 short term. $US major support is now only 2-3% away.


Chart 59b– The $US Index Monthly Chart

 


Commodities
Gold has recently rallied very well from multi year lows but may need further poor news from equities to kick much higher.
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 held the $US30/barrel area and staged a good 30% rally but major resistance ~US40/barrel is now very close at hand. We are 50-50 just here.
Iron Ore exploded in the previous week achieving our $US60/tonne target, we are now neutral.

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


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