Market Matters Report / Market Matters Weekend Report Saturday 3rd October 2015

By Market Matters 03 October 15

Market Matters Weekend Report Saturday 3rd October 2015

Market Matters Weekend Report Saturday 3rd October 2015

Is it safe to go back into the water!

Good afternoon and hope you are starting to enjoy the long weekend!


Last "Weekend’s Report" was all about "be Prepared" this weeks is “is it safe to go back into the water”! We believe the risk reward is such that it is safe while also keeping a small amount of cash in case we do have a final spike down in the near term. Remember, by definition a spike means short and sharp which, in turn, means one has to be extremely nimble when it occurs!!

Last week the ASX200 closed up only 10 points but we continued to experience significant volatility with a large 201 point (~4%) trading range. Market Matters has been flagging for the past few weeks the likelihood of another spike low under 4900 for the ASX200 with our view being that this would present an excellent buying opportunity; this occurred at the close on Wednesday with the futures hitting 4881- see charts 2,3 & 4.

Our market alert on Friday suggested to investors that Market Matters considered both the time and price areas right for allocating further investment funds into selected stocks.

The US S&P500 has also been unfolding as anticipated with a few weeks consolidation after August’s savage sell off and now with a potential final spike towards our targeted 1825 area - see charts 9, 10a & 10b.

However, as discussed in Friday morning’s report if we repeat the history of 2011 and the US markets make fresh lows from this recent pullback in coming weeks then the ASX200 should hold the 4900 support area.

Turning to the Markets

  • On Friday the US employment statistics were much worse than expected initially sending the Dow 259 points lower BUT over the last few trading hours we witnessed a very strong rally with Dow closing up 200 points!
  • This is a new phenomenon from that of recent months; a stock market actually reacting positively to bad news implies there is substantial built-up buying support returning to the market. A positive portent.
  • Technically, the US Indices are mixed with the Dow / NASDAQ looking positive and the S&P500 / Russell 2000 ideally targeting one final low for this corrective phase.
  • Mining giant Glencore was instrumental in last week's volatility falling over 30% on Monday but with the stock recovering extremely well to be only down 2.3% for the week. There was much talk market during the week about Glencore being the next Lehman Brothers emphasising 2 things: the incredible effect of fear and greed in market volatility, and we are near a significant market low…the current AFR leading story finding the sweet spots in a bear market makes us feel the bear market is over!!
  • For the S&P500 to make a fresh low further fresh bad news will potentially be required as the momentum is clearly improving. The bond market is a likely trigger after struggling last week.
  • The story of lower interest rates for longer appears to have further to run, as world economies tread water, hence when the market finally returns to some optimism stocks with sustainable solid yield are likely to be chased aggressively.

Stocks to Watch

The stocks that in Market Matters’ opinion should perform well are:

  • Macquarie, Suncorp, AMP, Bank of Queensland and the battered ‘Big 4’ banks.
  • Trading opportunities in the battered and very oversold resources and energy stocks will be closely monitored.
  • Both Regis (RRL) and Northern Star Resources (NST) have rallied very well over recent weeks although gold has gone sideways (slightly better in $A terms); there is the rising potential for the battered resources / energy sectors to follow suit as large short positions may get closed if stock market confidence returns.


As identified on Friday Market Matters is 80% sure the low in the ASX200 has occurred but that the US markets have a strong probability of a new spike low over the next week or so. Consequently, while keeping a small amount of funds in reserve in case we get another spike lower on the back of the anticipated US market move, we are keen buyers of the market looking to add to our existing portfolio.

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

What Matters this week

The ASX200 looks likely to open up around 50-60 points (1.2%) on Monday after the 200-point rally by the Dow.


                                                       Potential Investing opportunities for the coming week

· With the very strong probability that the low in the ASX200 is now in place we would aggressively add to purchases into any weakness.


                                                     Potential Trading for the coming week

· Short term, we believe the best trading action is to be long and add to holdings of identified stocks into any weakness.

· The hammered energy / resources sectors look to have the potential to follow the gold stocks that have recovered well.



Portfolio / Trade Holdings

Our portfolio had a good week outperforming the ASX200 with only ANN again letting the team down - the ASX200 gained a small 0.1%.

1. Ansell (ANN) -7% - medium term investment.

2. ANZ Bank (ANZ) -0.3% - medium term investment.

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

4. Challenger (CGF) +1% - medium term investment.

5. Commonwealth Bank (CBA) +2.7% - 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) +1.8% - medium term investment.

7. Macquarie (MQG) +3.1%- medium term investment.

8. Woodside (WPL) +1.6% - 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 Monthly Chart

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

American Equities

The American indices have recently experienced our anticipated correction falling very sharply in August similar to 2011. Sideways price action was anticipated short term and this may just about be over.

  •  The Dow has already exceeded predicted target.
  • The move 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 may be achieved.

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 close to completing a decent correction with the clearest leads recently 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 positive the “yield play” after its +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 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 an ultimate technical target now well under 70c BUT we can see a bounce towards 75c looming.

Chart 59b– The $US Index Monthly Chart


We are looking for Gold to continue its recent strong 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,
From the Market Matters 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.
The Reports contain general, as opposed to personal, advice. That means they are prepared for multiple distribution without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of a financial advisor.
The Reports are published by MarketMatters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports.
If you rely on a Report, you do so at your own risk. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence. The author holds an interest in the financial products of ANN, ANZ, BEN, CBA, CGF, MQG, SEK and WPL.