Market Matters Report / Market Matters Weekend Report Saturday 4th July 2015

By Market Matters 04 July 15

Market Matters Weekend Report Saturday 4th July 2015

Market Matters Weekend Report - Saturday 4th July 2015

A Happy 4th of July to our American readers


Afternoon all,

While the Americans are celebrating Independence Day, the Greeks are going to the polls this weekend for another history defining moment. It would be rather ironic if the Greeks voted to basically become independent of Europe ("No Vote") on the 4th of July weekend. However, it's very hard to imagine that Greece will cast an anti-Euro vote after the experience of their banks being shut for a week, illustrating a taste what will follow without the rest of Europe's support. It remains our opinion that Greece will eventually leave the Euro, it's just a question of when and how. We have witnessed extreme and exciting volatility in stocks over recent weeks and it's our opinion that this will remain a characteristic of 2015, especially if / when the US market joins the party. We say - Stand back and be patient, the volatility is likely to bring the market to you! The below moves over the last month are a few standout examples:

• China has fallen 28.8%, Slater & Gordon (SGH) -38%, Flight Centre (FLT) -21%, South32 (S32) -17%, Fortescue (FMG) -20% and Fairfax (FXJ) -17%.

When markets become volatile it presents great opportunities for the prepared and can bring disaster for those that are not - the 'Fear and Greed' impulse kicks in. We have a selection of stocks that we are looking to buy at identified levels but flexibility is vital when stock specific news emerges. The ASX200 has experienced amazing volatility over recent days with 100-point ranges becoming the norm. The investment community has become globalized very rapidly over recent years, a rallying market in China can be negative for the ASX200 as fund managers move their pools of money between different markets far more frequently than a decade ago when markets were more correlated.
Investors should at times stand back and consider the big picture as it's often a pleasant surprise. Consider the following statistics for the last 40 years, a great argument that property is NOT the only game in town. These numbers are also supportive of companies leveraged to equities - AMP, CGF and MQG:

• The average annual return from equities (All Ords.) is a very attractive 11%.
• With a 7 year investment horizon the market has NEVER yielded a negative return.

Another vital requirement for investors going forward is open-mindedness, consider the below 5 winners and losers, that caught our eye, year to date in the ASX200, not necessarily easy or logical picks:

Winners - Asciano (AIO) +32%, Harvey Norman (HVN) +36%, James Hardie (JHX) +37%, Qantas (QAN) +33% and TPG Telecom (TPM) +34%.

Losers - Fortescue (FMG) -34%, Medibanbk (MPL) -13%, Metcash (MTS) -40%, Seek (SEK) -17% and Slater & Gordon -36%.

Clearly avoiding landmines in today's environment is equally as important as picking winners. At Market Matters we are proud to have recommended sells on the following poor performers over the last 6-12 months - all resource stocks, Woolworths and Wesfarmers, the yield play when the ASX200 was close to 6000 and Seek over $18.50, potentially avoiding these has made our subscribers more money than buying iiNet prior to the takeover. Note we would no longer be sellers of Woolworths and Wesfarmers, believing the majority of their decline is over.

Hence when we had a small, aggressive trade in Myer on Friday, to the many doubters we say "let's wait and see".....remember this represents a small aggressive trade.

Our views at a glance:

1. US equities will correct 10-15% in the relatively near future.
2. There are no reasons for traders / investors to buy Australian resource stocks at present.
3. Commonwealth Bank (CBA) will trade between $75 and $90 over coming 12-18 months – very useful for option sellers.
4. I am an accumulator of any fresh lows in 2015 by Australian banks. Short term their bounce may be close to completion.
5. European equities, led by the UK FTSE and Spain are negative.
6. In Asia, Japan looks ready to correct but China feels likely to bounce well.

Potential stocks on our likely shopping list for coming months:

· Investing - ANN, ANZ, AMC, CBA, CGF, CSL, MQG, MTU, RHC, RMD, SEK and TLS.
· Trading - RRL and FMG ~$1.60.

Any subscribers not familiar with codes or companies can do some quick checking on the ASX website: http://www.asx.com.au/ - See charts of all below.

Summary:

No major change here:

1. I will remain patient on further purchases but I now have my buyer hat in place.
2. I continue to have no interest investing in the resources sector.

* Watch out for alerts.

What Matters this week

The ASX200 open on Monday is extremely hard to pick with the Greek vote this weekend.


Potential Investing opportunities for the coming week

Hopefully investors are now sitting on a healthy cash position awaiting buying opportunities – see above.

Potential Trading for the coming week

· Short term I am unsure after recent choppiness, clarity will likely return soon.
· For aggressive traders / investors I have bought Myer (MYR) and am watching Regis Resources (RRL) after fresh 2015 lows.


 

Portfolio Holdings

My portfolio had an average week, closely matching the market last week, the ASX200 fell 0.1%.

1. Ansell (ANN) -0.2% - medium term investment.
2. Bank of Queensland (BOQ) +2% - medium term investment.
3. Commonwealth Bank (CBA) +0.1% - long term Investment.
4. Mirvac (MGR) +1.4% - medium term investment.
5. Myer (MYR) -0.3% - trading position.
6. Vocus (VOC) -2.9%- Medium term investment.

• Cash for future purchases, ~30%.

Australian ASX200

We continue to look to spread our portfolio into more growth and offshore earning stocks going forward but importantly, with patience.

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 REIT Index Monthly Chart

Chart 5b ASX200 Banking Index Monthly 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 continue to show signs of topping out for 2015.

Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Dow Jones Index Daily Chart

Chart 10 – S&P500 Monthly Chart

Chart 11 – NYSE Composite Index Monthly Chart

Chart 12 – Russell 2000 Index Monthly Chart

Chart 13 – NASDAQ Monthly Chart

Chart 14 – The Canadian Composite Index Monthly Chart



European Indices

European Indices look to have topped for a while which is not surprising taking the Greek debacle into account.

Chart 15 – Euro Stoxx 50 Weekly Chart

Chart 16 – The UK FTSE Weekly Chart

Chart 17 – Spanish IBEX Monthly Chart

Chart 18 – German DAX Monthly Chart

Chart 19 – Greek Stock Market Weekly Chart


Asian Indices

Asian indices have been very bullish, led by China as it opens its market to offshore investors, Japan is still receiving great strength from ongoing aggressive QE. However the recent plunge of 28.8% by Chinese Index questions if the other Asian Indices are close to an inflexion point.

Chart 20 – Hang Seng Weekly Chart

Chart 21 – China Shanghai Composite Monthly Chart

Chart 22 – Japanese Nikkei 225 Monthly Chart


Australian Stocks

Quality stocks with sustainable yield have been standouts but some industrial stocks are now looking interesting. we no longer are a net seller of the “yield play” after its 15-20% correction and are looking to buy growth / yield stocks BUT not resources.

Strong selection is arguably more important than in many decades.

Chart 23 – BHP (US) Monthly Chart

Chart 24 – BHP Weekly Chart

Chart 25a – Woodside (WPL) Monthly Chart

Chart 25b – Santos (STO) Weekly Chart

Chart 26 – RIO Tinto (RIO) Weekly Chart

Chart 27 – Fortescue Metals (FMG) Weekly Chart

Chart 28 – Vale (US) Weekly Chart

Chart 29 – Newcrest Mining (NCM) Monthly Chart

Chart 30 – Regis Resources (RRL) Weekly Chart

Chart 31 – Barrick Gold Corp. (US) Monthly Chart

Chart 32a – CBA Quarterly Chart

Chart 32b – CBA Daily Chart

Chart 33a – ANZ Bank (ANZ) Monthly Chart

Chart 33b – ANZ Bank (ANZ) Daily Chart

Chart 34a – Westpac Bank (WBC) Weekly Chart

Chart 34b – Westpac Bank (WBC) Daily Chart

Chart 35 – National Bank (NAB) Weekly Chart

Chart 36 – Macquarie Bank (MQG) Monthly Chart

Chart 37 – Bank of Queensland (BOQ) Weekly 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 (TLS) Monthly Chart

Chart 47– M2 Group Ltd (MTU) Monthly Chart

Chart 48 – 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 Ltd (ANN) Monthly Chart

Chart 54 – Amcor Ltd (AMC) Monthly Chart

Chart 55 – Crown Resorts (CWN) Monthly Chart

Chart 56– Myer Holdings (MYR) Weekly Chart

Chart 57– JB Hi-Fi (JBH) Monthly Chart

Chart 58– Harvey Norman (HVN) Monthly Chart

Chart 59– Flight Centre (FLT) Monthly Chart

Chart 60– Slater & Gordon (SGH) Monthly Chart

Chart 61– Australian Dollar (AUD) Weekly Chart

The $A continues to decline with an ultimate technical target now well under 70c.


Commodities

We are now neutral Gold as rising interest rates could easily derail the recent strength. There is divergence with the stocks and precious metal.

Copper remains very negative on a longer term basis, a very similar chart pattern to Newcrest Mining (NCM) and unfortunately we all saw what happened there.

Crude Oil has bounced as anticipated; we still expect renewed weakness over coming months.

Iron Ore is 50-50 here BUT the trend is clearly down and long term futures remain bearish.

Chart 62 – Gold Monthly Chart

Chart 63 – Copper Monthly Chart

Chart 64 – Crude Oil Monthly Chart

Chart 65 – 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,

MarketMatters Team

All figures contained from sources believed to be accurate. Marketmatters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy.
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The author holds an interest in the financial products of ANN, BOQ, CBA, MGR & VOC.