Market Matters Report / Market Matters Weekend Report Saturday 5th March 2016

By Market Matters 05 March 16

Market Matters Weekend Report Saturday 5th March 2016

Market  Matters Weekend  Report  Saturday 5th March 2016

Market Matters Weekend Report – 5th March 2016

Good afternoon everyone and welcome to our first report of Autumn 2016.

Overview

Last week equities continued with their recent strength following almost the exact path Market Matters has been forecasting - ASX200 +4.3% and the S&P500 +2.7%. As discussed in Friday morning’s report our focus has now switched 100% from buying the recent panic selling to picking levels from which to commence selling

We should highlight that while Market Matters is in "sell mode" we do expect to see higher prices before ‘pulling the trigger’.

It never ceases to amaze us how the stock market cycles come and go following the Fear & Greed mentality; this is true for both indices and sectors alike. Just consider some of the swings over recent times because they clearly illustrate that running with the crowd is very dangerous. For example:

1. Investors hated gold stocks back in 2013, now they have doubled / tripled so analysts and investors love them.

2. Retail investors unfortunately led the stampede into high yielding stocks back in 2014/5 and suddenly their portfolios are 30% in the red.

3. Investors held and hoped that BHP would be ok for years and then when the press turned nasty 6 weeks ago the stock plunged.......yet suddenly BHP has rallied 30%.

4. Similarly, everybody hated resources / emerging markets in late January, now the majority have rallied over 20%.

5. Markets have had big pullbacks on for example Greece, US debt downgrade, China and local properly concerns but when the press moves on to other interest markets usually return to normal and all is forgotten.

6. After the recent 15% correction by the S&P500 optimism is returning fast, beware we still believe the market will be a lot lower over the next 12 months.


Turning to the Markets

We can turn to some simple statistics to forecast how far the ASX200 might rally in March; the average monthly range for the ASX200 over the last 6 months is 385 points with a relatively small deviation.

Hence, if the ASX200 has already seen the low for March at 4868 the likely top will be around the 5250 area i.e. 3% higher than Fridays close.

Major technical resistance is in the 5300 area so any decent move over 5200 will lead to us watch very closely for sell triggers.

Short term any 50-60 point pullbacks can be bought next week because we remain bullish targeting ~5250 this month but take note that a break back under 5000 by the ASX200 will negate this short term bullish outlook.

In addition, short term traders should be aware that over the last 6 weeks the ASX200 has averaged ~200 point range implying we may actually challenge 5250-5300 next week.

Remember there are still many shorts / underweight investors and traders out there which in turn can lead to continued strength from equities.

The Australian Banking Index

Last week, the battered local banking index surged over 8%, led by ANZ and Westpac who both gained around 11%

The Australian Banking Index has corrected over 30% since March 2015; technically, it looks set to rally a further 10% which will retrace 35-40% of the large fall.

Standout technical chart(s) of the week

Market patterns repeat with eerie regulatory; this is one of the main reasons that Technical Analysis is used as a tool by many successful investors / traders.

As you know from the above, if events evolve as predicted we will turn negative the S&P500 forecasting a 20% correction minimum with the chart comparisons below not helping this negative outlook.

When we compare the chart below of the US S&P Oil & Gas sector with the local banking sector chart above -it's scary, they are almost an identical overlay. If the local banks continue to follow the path of the oil & gas sector (for whatever reason) they will potentially fall significantly lower longer term.

 


US Stocks

The US S&P500 has now rallied over 10% from its panic lows of mid-February and is now amazingly only 6.7% from all-time highs.

Market Matters technically remains cautiously bullish US stocks targeting new all-time highs prior to a +20% correction.



Emerging Markets

As we forecast, the Emerging Markets Index accelerated up last week. After making fresh recent highs, we envisage a further 8-10% upside.

This should be supportive of the ASX200 and especially resource stocks - last week Vale, the largest Iron Ore producer in the world, rallied over 60%!!



Summary

In summary, after putting the pieces of the puzzle together, we remain bullish targeting 5250-5300 for the ASX200. Our simple reasoning is:

1. The ASX200 statistically targets the 5250 region in March assuming the market does not break 4868.

2. The ASX200 overhead resistance is at 5250-5300 while the market support remains at 5000.

3. The Banking Sector should gain a further 8-10%, similar to last week, prior to hitting resistance.

4. The Emerging Markets Index should rally a further 8-10% before hitting strong resistance.


Looking at the individual charts, including the S&P500, a sharp rally / fast rally next week would not surprise.

Remember that longer term, if the US S&P500 makes new all-time highs, we are then looking for a +20% correction and hence we will be looking to sell into any strength between 5250 and 5300.

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


What Matters this week

The ASX200 looks likely to open up around 35 points on Monday after a solid night on Wall Street and strong moves in resource stocks.

Potential Investing opportunities for the coming week

  • Be patient and look to reduce equity exposure into strength.

Potential Trading opportunities for the coming week

  • Short term, any 50-60 point pullback can be bought next week as we remain bullish targeting ~5250 this month - note a break back under 5000 by the ASX200 will negate this short term bullish outlook.
  • Traders should also be aware that over the last 6 weeks the ASX200 has averaged ~200 point range implying we may actually challenge 5250-5300 next week.


Portfolio / Trade Holdings

The Market Matters portfolio enjoyed a strong week strongly aided by the banking sector rallying over 8% - the ASX200 rallied 4.3% for the week.

https://www.marketmatters.com.au/blog/post/market-matters-portfolio-thursday-3-march-2016

  •  Cash position now up to ~17%.

 

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 5 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 now look bullish actually targeting fresh all time highs in 2016, a break under this month's lows is required to turn this view negative.

Chart 8 – Dow Jones Index Monthly Chart


Chart 9 – Russell 3000 Weekly Chart


Chart 10a – 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 recent months, since the ECB disappointment. Last week they showed signs of strength compared to other major indices, the FTSE looks the strongest at present.

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

Asian indices have regained some stability and the recent strength of other world indices. However the Emerging Markets Index (chart above)  looks mildly bullish targeting a further 10% rally from current levels IF it can break last week's high.

Chart 19 – Hang Seng Weekly Chart


Chart 20 – China Shanghai Composite Index Monthly Chart


Chart 22 – Japanese Nikkei 225 Index Monthly Chart



Australian Stocks

Resource stocks continue to enjoy the strong counter-trend rally that we anticipated. Banks rallied strongly last week as investors went searching for "cheap" stocks.

Chart 23 – BHP Billiton (US) Monthly Chart


Chart 24 – BHP Billiton (BHP) Weekly 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 – 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) Monthly Chart


Chart 37b – Bendigo & Adelaide Bank (BEN) Monthly Chart


Chart 38a – AMP Ltd (AMP) Weekly Chart


Chart 38b – Henderson Group (HGG) Daily 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 45a – Seek Ltd (SEK) Monthly Chart


Chart 45b – REA Group Quarterly Chart


Chart 46 – Telstra Corp. (TLS) Monthly 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 $AUD's major technical support is still  ~60c, the bounce to ~74c that we mentioned over recent weeks has materialised.


Chart 59b– The $US Index Monthly Chart



Commodities

Gold has recently rallied very well from multi year lows but may need further poor news from equities to kick much higher.

As we have been saying 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 $US30/barrel area recently and staged a good 30% rally but major resistance ~US40/barrel is looming.

Iron Ore has continued to rally well from the $US40/t area with a further 10% upside looking likely.

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


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.