Market Matters Report / Market Matters Weekend Report Saturday 26th September 2015

By Market Matters 26 September 15

Market Matters Weekend Report Saturday 26th September 2015

Market Matters Weekend Report Saturday 26th September 2015

Good Afternoon all,


Overview

Following the current 16% stock market correction, based on Fridays close, the annual dividend yield for the local market has reached 5.5%, over double the RBA's 2% cash rate. While many investors are clearly nervous at present, the current retracement is actually quite normal!

The average correction over the last 35 years is exactly 16% so we are in the normal correction range adding further support for our view of an evolving strong buying opportunity. The equity market is currently focusing on bad news but history tells us this will change.

Despite the press regularly panicking about share market volatility and in turn significantly influencing the investor greed / fear syndrome, the market has been up 67% of the time since 1980 and provided a very healthy average return of 8.7%. It was only 5 years ago Sydney property was all doom and gloom in the press (and a buyer's market) yet BIS Shrapnel reported at the end of June this year a 45% increase for Sydney in only 3 years! What has the press been saying during this time!!!

Interest rates may have fallen from 3.5% to today's 2% over the last 3 years but confidence / complacency has arguably been the largest driver of this massive appreciation in property; very similar to CBA shares rallying 128% from September 2011 to April 2015.

All markets will, obviously, have their major trends established on underlying fundamentals / value BUT the extremes are created by "Fear & Greed" and it is these extremes of human emotions that create excellent investment opportunities.

Turning to the Markets

Currently there is significant FEAR in the equities’ market which is clearly illustrated by the VIX chart as people pay a high price for protection to downside moves in equities - see chart 6.

Last week saw a continuation of the downtrend that began aggressively in August and continues to follow our predicted road map. If we break down this move we see that after the ASX200 initially fell over 600 points it consolidated in a 344 point range for 25 days, now after the recent 800 point fall the market has consolidated in a 377 point range for 24 days....

Summary

We regularly highlight the repetition of price and time ranges so, simply, we are now looking for the continuation of the move down into the anticipated spike low and excellent buying opportunity for a potential Christmas rally.

 

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

What Matters this week

The ASX200 looks likely to open basically unchanged following the flat Friday night by the S&P500. 

 

Potential Investing opportunities for the coming week

  •  No change here. Hopefully investors put some capital to work into the panic on August 25th, we would aggressively add to purchases in the 4900 area.         

                                                                         Potential Trading for the coming week

 

  •  Short term we believe the best trading action is also to now stand back and look to allocate any remaining capital to the market if the ASX200 retests the 4900 area. We will be focusing on those stocks that have fallen the most and now provide the best risk/reward
  • Crown (CWN) looks excellent risk / reward buying via options on any spike down towards the $9.50 area – Chart 55.  

 

 Portfolio / Trade Holdings

Market Matters portfolio had an ‘average’ week underperforming the ASX200 slightly due to exposure to local banks - the ASX200 fell 2.5% led by the banks who resumed their recent downtrend falling 5% as a sector in the week.

1. Ansell (ANN) +0.3% - medium term investment.

2. ANZ Bank (ANZ) -4.9% - medium term investment.

3. Bendigo Bank (BEN) -4.4% - medium term investment.

4. Challenger (CGF) +0.3% - medium term investment.

5. Commonwealth Bank (CBA) -5.8% - long term investment - may be weak early next week when it resumes trading after final placement of shares for its capital raising.

6. Seek (SEK) unch. - medium term investment.

7. Vocus (VOC) +1.9%- medium term investment.

8. Woodside (WPL) -2% - medium term investment.

  •  Cash for future purchases ~15%.


Australian ASX200
We continue to look to spread our investments into a more diversified portfolio with sustainable yield in an environment where cash and no debt is likely to be king.
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 Quarterly Chart


Chart 7b – The German 10-year Interest Rate Quarterly Chart


American Equities

The American indices finally had our anticipated correction, albeit very sharply, in August. Sideways price action was anticipated short term and this may be just about over.

  • The Dow has already exceeded predicted target.
  • The more followed (by market observers and participants) S&P500 has been relatively stronger and to date has fallen 2% short of our target which we still believe will be achieved.
  •  Interestingly, last night the Dow was up 113 points while the S&P500 and NASDAQ were both down in line with our view that the broader market is likely to underperform short term.


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 be in the middle of a decent correction with the clearest leads coming from the UK's 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 – German DAX Index Weekly Chart



Asian & Emerging Markets Indices
Asian indices have been extremely volatile over recent months in sympathy with the plunging Chinese stock market and weakness / devaluation of the Yuan. The Nikkei looks to be technically set for a decent correction.

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 are now a buyer of the “yield play” after its 18-20% 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) Weekly 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 45a – 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) Weekly Chart

The $A continues to decline with an ultimate technical target now well under 70c BUT we can see a bounce towards 75c looming.



Chart 59b– The $US Index Monthly Chart



Commodities

We are looking for Gold to continue its recent strong countertrend rally.
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 causing us to watch carefully for buying opportunities within the sector. We are 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,
The Market Matters Team



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