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!

Overview

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.


Summary:

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


Commodities

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



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