Market Matters Report / Market Matters Weekend Report Saturday 28th November 2015

By Market Matters 28 November 15

Market Matters Weekend Report Saturday 28th November 2015

Market Matters Weekend Report  Saturday 28th November 2015

Most of the local market rests for Thanksgiving


Welcome to the weekend everyone!

Bit of a late start today on the weekend report because it was up and off before dawn this morning for the Wipeout Dementia Surfing Contest at Queenscliff beach. Yes, with the help of Mike Baird and Wayne ‘Rabbit’ Bartholomew (the 1974 World Surfing Champion), we beat the other teams. Nearly $100,000 has been raised by the participants so a terrific result!

Overview

Last week was relatively quiet on the Index front. The ASX200 fell ~1%, following the generally weak Asian Indices, the Dow was basically unchanged as the US enjoyed Thanksgiving and Europe achieved small gains.

However, a quiet index did not mean it was quiet on the stock front where there were a couple of noticeable moves: Slater & Gordon -74% and BHP -8%. Overall these moves had a relatively small impact on the index but the psychological impact of the enormous wealth destruction is hard to gauge.

Seasonally we are in a strong period into early January likely aided by the significant ANZ, NAB and WBC dividends being paid in mid / late December. Over the last 6 years the average rally from the November sell-off is exactly 7% with the two extremes at 5.6% and 9.1% which, in turn, are relatively close statistically.

Turning to the Markets

If we extrapolate the above percentage moves to today's market, assuming that 4979 is the November low, we get the following potential targets for the "Christmas Rally" should it occur:

  • The average target is 5327 with a lower target of 5258 and an extreme of 5432 - hence the 5285 level achieved on the 23rd of November is already within the lower ends of expectations.


The ASX200 has been hammered since April, falling 1079 points (18%) top to bottom, classic technical fibbo retracement levels are:

  • 0.382% = 5330, 50% = 5458 and 0.618% = 5585.


The combination of these two sets of numbers suggest we will see a Christmas rally into at least the 5330 level and perhaps even to 5450.

When we look closely at the dominant banking sector and specifically ANZ, it looks as if there is another move up towards $28.50 (around 4%) which ties in with our view of the Index – see chart 33b

We also have a number of major stocks that have had a horrible year, in particular within the resources, energy and large supermarkets sectors with BHP, Woodside and Woolworths being some of the most notable. A classic mild short-covering rally into Christmas would not surprise which, in turn, would help the ADSX200 reach our target areas.


Chart of the week

  • The December SPI…. see Chart 4. With futures often leading the index it’s worth watching this contract carefully. At present it looks look an ‘abc’ pattern is forming with potential upside at 5325 and 5450. Consequently, we would be buyers around 5155 on the ASX200 using an excellent risk /reward 50 point stop.


Summary:

The US markets remain on track to make new all-time highs in coming months; wouldn’t it be nice to have such a bullish market locally! It seems that the main risks to the short term positive expectations of our market remain nervousness over both China and the Emerging Markets Index

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

What Matters this week

The ASX200 looks likely to open unchanged on Monday with most eyes likely to be on BHP and SGH early in the session.

 

Potential Investing opportunities for the coming week

  • Market Matters advocates staying full invested but wearing a Sellers Hat as we look to reduce our exposure in coming weeks; hopefully into expected market strength.

 

Potential Trading for the coming week

  • See Chart of the Week. We are a buyer of the ASX200 around 5150 with a 50 point stop for an excellent risk / reward trade.

  

Portfolio / Trade Holdings

Market Matters’ portfolio had a disappointing week underperforming the market with BHP and BOQ causing the pain - the ASX200 fell 1%.

1. Ansell (ANN) -1.5% - medium term investment.

2. ANZ Bank (ANZ) -1.4% - medium term investment.

3. Bendigo Bank (BEN) -0.8% - medium term investment.

4. Bank of Queensland (BOQ) -5% - medium term investment.

5. BHP Billiton (BHP) -8.4% - short term investment.

6. Commonwealth Bank (CBA) +0.4% - long term investment.

7. Seek (SEK) -2.3% - medium term investment.

8. Suncorp (SUN) +0.4% - medium term investment.

9. Oil Search (OSH) -0.6% - short / medium term trade.

10. Mirvac (MGR) +0.3% - short / medium term investment.

 

  • Cash position under 2%.


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 10-year Interest Rate Quarterly Chart


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


American Equities

The American indices experienced our anticipated correction, especially very sharply in August similar to 2011. The S&P500 has since rallied very impulsively almost making fresh all time highs, the market looks very strong at present and this remains a seasonally bullish time for equities.

  • The Dow exceeded predicted target on pullback and now remains bullish targeting the 19,000 area.
  • The NASDAQ now looks strong and a test of 5000 is a possibility.
  • The more observed (by market observers and participants) S&P500 fell 2% short of the technical target during its pullback and a clear break of the current 2020 area will imply the corrective phase is not over.
  • The NYSE and Russell 2000 indices are still looking average i.e. not the big NASDAQ blue-chips like Apple and Google.

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 have completed a decent correction with the clearest leads recently coming from the UK's FTSE, German DAX and Spanish IBEX. The European Indices are outperforming the US recently as further economic stimulus is anticipated by the ECB in December.

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 uncertainty in Chinese stock market and weakness / devaluation of the Yuan. Fridays 5.5% fall by Chinese stocks, led by brokerage firms, was a return to recent volatility.

Chart 20a – Hang Seng Weekly Chart


Chart 20b – China Shanghai Composite Index Weekly Chart


Chart 21a – Emerging Markets MSCI ETF Weekly 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 interesting. We remain cautiously positive the “yield play” after its +20% correction. We're no longer bearish the resources sector from a risk / reward trading perspective and in fact some low risk buying opportunities maybe arising.
Chart 23 – BHP Billiton (US) Monthly Chart


Chart 24 – BHP Billiton (BHP) Daily 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 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 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 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 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 is weak at present, it has rejected strongly the $US1200/oz resistance and reached 5-year lows on Friday.

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 $US40/barrel area recently but has not managed to rally.
Iron Ore remains around multi-year lows and like Crude Oil has 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

Please note this is our personal TECHNICAL opinion of markets and "General Advice" taking no account of individual’s circumstances.
Have a great week, from Richard and the Market Matters team


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