Market Matters Report / Market Matters Weekend Report - Saturday 25th July 2015

By Market Matters 25 July 15

Market Matters Weekend Report - Saturday 25th July 2015

Market Matters Weekend Report - Saturday 25th July 2015

Afternoon all

Last week we witnessed ongoing volatility in financial markets with the commodity markets grabbing the headlines courtesy of both oil and gold. Markets are unfolding exactly as we have been forecasting with the possible exception of one final top from US equities. The clear short term signals from different global equity markets are conflicting at present:

Bearish short term - ASX200, ASX200 Financial Sector and UK FTSE.
Bullish short term - German DAX and Japanese Nikkei 225.

However, our overriding view of a pending ~15% correction by US equities and the ASX200 reaching the 5100-5200 area must dominate investment decisions over coming weeks, the previously targeted final blow off in US equities now looks far less likely. Our largest concern at present is the Australian banking and finance sector, the lack of an ability to rally with interest rate cuts in Canada and New Zealand and one looking more likely in Australia illustrates all is not well. This is very much a time we believe in embracing the "KISS" principle - keep it simple stupid. If we are correct the below strategy should be firmly in place:

Investors should be underweight equities (in cash) looking to implement a plan to buy any panic sell off, and definitely not get caught up selling when negative emotions hit the market.

The gold and oil markets are following our forecasts exactly at present hence we have been active in the gold sector:

1. Gold - We maintain a very contrarian view at present. We are bullish medium term looking for a strong countertrend rally, Friday’s sharp 9.6% rally by the Junior Gold Miners (US) ETF demonstrates very clearly this elastic band is becoming way too stretched to the downside - see chart 60b. Please note we like RRL and NST in the gold sector but not NCM.
2. Oil - Conversely we still believe crude oil will make fresh lows for 2015 around the $US40/barrel area and unsurprisingly we also believe the energy sector will fall further.

Our views at a glance:

1. US equities will correct ~15% in the relatively near future.

2. The ASX200 is targeting ~5100-5200 area.

3. The gold sector is providing some excellent countertrend opportunities.

4. Oil and stocks within the energy sector remain bearish targeting fresh 2015 lows.

5. Commonwealth Bank (CBA) will trade between $75 and $95 over coming 12-18 months – very useful for active investors and option sellers / traders.

Any subscribers not familiar with codes or companies can check on the ASX website: http://www.asx.com.au/ - see charts of all below.

Summary:

1. We will potentially get more aggressive with selling as risks are increasing of a sharp retracement.

2. We continue to have no interest investing in the resources sector but potentially excellent trading opportunities are now appearing, led by the gold sector.

* Watch out for alerts, they are likely to become more frequent in the current environment.


What Matters this week

The ASX200 looks likely to open down ~50 points (1%) on Monday.

 


Potential investing opportunities for the coming week

· We are looking to continue reducing equity exposure into any strength / or follow through weakness.

Potential trading for the coming week

· For aggressive traders / investors we are long FMG, NST and Regis Resources (RRL).
· We are looking for further buying opportunities in the gold sector, likely through increasing our NST exposure. 


 

Portfolio / Trade Holdings

Our portfolio had an average week, matching the overall market last week, the ASX200 fell 1.83%.

1. Ansell (ANN) -2.7% - medium term investment.
2. Bank of Queensland (BOQ) -0.6% - medium term investment.
3. Bendigo & Adelaide Bank (BEN) +0.23% - medium term investment.
4. Challenger (CGF) -1.1% - medium term investment.
5. Commonwealth Bank (CBA) -2.5% - long term Investment.
6. Mirvac (MGR) -4.2% - medium term investment.
7. Seek (SEK) +0.9% - medium term investment.
8. Vocus (VOC) +4.4% Medium term investment.

• Fortescue (FMG) October 1.75 Calls - Trade.
• Northern Start Resources (NST) - Trade.
• Regis Resources RRL) - Trade.

• Cash for future purchases, ~18%.

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 5c ASX200 Financial Sector (ex-property) Index 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

Chart 7c – Australian 3 year Bonds Daily Chart

 

American Equities

The American indices continue to show signs of a topping pattern for 2015 but fresh highs are likely first.

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 / close to a decent correction with clearest leads coming from the UK FTSE and Spanish IBEX. Short term the FTSE is negative but the DAX, STOXX and IBEX are still threatening fresh 2015 highs.

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 Daily Chart

 

Asian Indices

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. The Nikkei Index looks set for one final 2015 top prior to good selling opportunities.

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 - some trading opportunities are arising especially in the gold sector.

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 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) Daily Chart

Chart 33a – ANZ Bank (ANZ) Monthly Chart

Chart 33b – ANZ Bank (ANZ) Daily Chart

Chart 34a – 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 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 Ltd (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 49a – Westfield Corp. (WFD) Monthly Chart

Chart 49b – Mirvac (MGR) 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 Ltd (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 Ltd (JBH) Monthly

Chart 58– Harvey Norman (HVN) Monthly

Chart 59– Australian Dollar (AUD) Monthly Chart

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


Commodities

We are looking for Gold to reverse back up aggressively in coming weeks.

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 bounced as anticipated; we still expect renewed weakness over coming months to make fresh 2015 lows.

Iron Ore remains positive for a countertrend bounce.

Chart 60a – Gold Monthly Chart

Chart 60b – Junior Gold Miners (US) ETF Daily 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

 

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