Market Matters Report / Market Matters Weekend Report Saturday 30 January 2016

By Market Matters 30 January 16

Market Matters Weekend Report Saturday 30 January 2016

Market Matters Weekend Report  Saturday 30 January 2016

 

Market Matters Weekend Report

 

Welcome to a February that hopefully will be more pleasant than January's 5.5% aggressive correction!

 

Overview

What a difference a day / announcement can make for stocks. Yesterday the Bank of Japan (BOJ) surprised markets by announcing a negative interest rate policy to attempt to improve their struggling economy. Literally the BOJ have imposed a 0.1% fee on some current account deposits i.e. a negative rate of return, hoping the commercial banks will be encouraged to increase their number of loans and hence stimulate the economy.

Equities have been living on a "junk food style diet" of central bank stimulus since the GFC; which fuelled the bull market and suddenly it appears there is maybe more to come.
The initial market reaction has been very positive with Japan's equities rallying 2.8% and the Dow 2.5%. If this strength can follow through we are bullish for coming months.

 

We know it is very hard to imagine at present but the charts are still pointing towards the fresh all time highs from the US indices.

 

Importantly a break back under 1900 in the S&P500 (2.1% lower) would turn us neutral/negative equities.

 

S&P500 Chart

 

Shorter term Market Matters is targetting a further 6% upside from the UK FTSE and ~15% from the Emerging Markets Index. Therefore we believe that the ASX200 is likely to rise over 5200 and perhaps up towards the 5300-5400 area.
We believe that locally Friday was also an excellent illustration of how "2016 is likely to be a change in favourites" within Australian Equities. e.g. Fortescue (FMG) +13.8%, Oil Search (OSH) +6.6%, Crown Resorts (CWN) +3% but Macquarie Group (MQG) -2.6%, CSL Ltd -2.9% and Magellan Financial Group (MFG)-7.8%.

 

Market Matters cannot stress enough how flexible and open minded we believe investors will need to be in 2016, as our view remains that it will be the year of changes in trend.

 

On Monday the ASX200 is likely to open around 5050, this will be 10.5% above January's lows changing our general position from market buyer to neutral. We are looking to start selling over 5200.

 

The Emerging Markets Index has rallied almost 11% from our targetted fresh lows, ideally this corrective rally will run a further 15% . However we believe that the good risk/reward opportunity to purchase resource stocks has now passed and we are actually looking for areas to reduce our exposure into strength.

 

"Short covering" may have an explosive impact on this sector in coming weeks, if strength continues, as was demonstrated perfectly by Fortescue (FMG) on Friday rallying 13.8%

Emerging Markets Chart

Standout technical chart of the week

The Japanese Nikkei225 Index is technically very bullish targetting the 21,500 area i.e.20% higher!  Fridays negative interest rate policy announcement has given the market a potential catalyst for this strong advance.

Nikkei Chart 



Summary

Market Matters remains cautiously bullish targetting a break of 2015 highs by US equities and the Japanese Nikkei. This positive stance will be repealed if the S&P falls back under 1900 next week ~2.1% lower. 

We believe that the ASX200 will be pushed higher by overseas equities with our most optimistic target arounf 5375 but our intention is to increase cash holdings from the 5200 area.
Remember our medium term view (1-2 years) for indices is negative and hence caution is warranted.

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

What Matters this week
The ASX200 looks likely to open up around 50 points on Monday after Fridays almost 400 point surge by the Dow.

 

 Potential Investing opportunities for the coming week

  • From both a value and technical perspective our favourite buys at Fridays levels are Suncorp (SUN) and Crown Resorts (CWN). 
  • We will be "wearing our sellers hat" over 5200 looking to increase cash position back over 20%.

 

Potential Trading for the coming week

  • Market Matters is a buyer of Credit Corp (CCP) ~ $11.30 with stops under $10.50.
  • We are looking to take half profit on FMG around $1.90 and RIO around $41. Our target for the second half of our BHP position is around $16.50.

 

 Portfolio / Trade Holdings

The Market Matters portfolio had an excellent week outperforming the ASX200 courtesy of our trading / short term positions in resource stocks. - the ASX200 was up 2.3% for the week.
1. Ansell (ANN) +1.3% - medium term investment.

2. ANZ Bank (ANZ) +4.1% - medium term investment.

3. Bendigo Bank (BEN) +2.6% - medium term investment.

4. BHP Billiton (BHP) +8.6% - short term trade.

5. Commonwealth Bank (CBA) +1% - long term investment.

6. Healthscope (HSO) -3.3% - medium term investment.

7. Seek (SEK) +3.3% - medium term investment.

8. Suncorp (SUN) +0.3% - medium term investment.

9. Oil Search (OSH) +12.2% - short / medium term trade.

10. Mirvac (MGR) +1.3% - short / medium term investment.

11. Fortescue (FMG) +12.1%- short / medium term investment

12. Rio Tinto (RIO) +2.3% - short / medium term investment

  •  Cash position now ~7.5%.

 

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 generated execllent technical buy signals this week:

  • The S&P500 is targetting fresh all time highs while it can remain over 1900. 


Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Russell 3000 Weekly 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

Most European Indices have struggled over the last 6 weeks, since the ECB disappointment, with China adding to the selling pressure. The FTSE is now targetting a 5-6% corrective rally.

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

The Asian indices have continued their extreme volatility since the start of 2016 in sympathy with the uncertainty in Chinese stock market and currency.

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 previously, but now the resource sector is improving. Hence the reason we have recently been positive the resources sector from a risk / reward trading perspective, with the recent buy opportunities.

Chart 23 – BHP Billiton (US) Monthly Chart


Chart 24 – BHP Billiton (BHP) Daily 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) 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) Weekly 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 been rallying well this year.

Copper still remains in a downtrend on a longer term basis and has  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 a sustained 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  

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