Market Matters Report / Market Matters Weekend Report - Sunday 15th November 2015

By Market Matters 15 November 15

Market Matters Weekend Report - Sunday 15th November 2015

Market Matters Weekend Report - Sunday 15th November 2015

Our thoughts and prayers are with the people of Paris and France.

Good evening everyone

Sometimes I sit back and just ponder the mad and crazy world in which we live!

Overview

The ASX200 had a very tough week falling over 3% after a meltdown in the resources sector led by BHP falling 10.8% and Santos 22%. Next week looks set to continue with the current negative theme after the Dow fell over 200 points on Friday night AEST and it’s unclear how the actions in Paris will affect investor’ sentiment.

It's amazing how quickly markets can turn! On Thursday, technical buy signals were generated and by Friday morning they were all gone in a flash. The price action we have seen sending the ASX200 back to the 5000 forces us to reconsider our short / medium term view.

Turning to the Market

Let’s look at some salient points:

1. What appeared to be a strong impulsive / bullish rally by the ASX200 from 4918 to 5385 has now turned into a neutral pattern.

2. The best risk / reward buy signal would actually be generated by a false break under 4918.

3. The Emerging markets Index looks set to fall another 10-15% and with the strong correlation to the ASX200 this is a clear concern for local equities short term.

4. US equities have now pulled back to support, but the NASDAQ, Russell and NYSE Indices are suggesting the possibility of a test of August lows – we’re already there!

5. The European Indices remain relatively strong with further ECB stimulus anticipated soon.

6. Some big name stocks, like BHP and Wesfarmers, have reached targeted retracement areas, but other stocks like Telstra, gold stocks, NAB and Macquarie look likely to experience further short-term weakness.

So where are we now?

  • As discussed recently, the usual retracement by the ASX200 in November over the last 5 years is 7.2%, with the Christmas rally commencing sometime after the 16th November.
  • So far, the ASX200 has corrected 7% with a bit more expected on Monday, 16th November, basically the ASX200 is still following seasonal patterns perfectly.
  • Markets always look awful at their lows and they certainly look / feel awful and, strangely, often compounded with terrible news such as we have from Paris and Brazil!
  • Investors need to be prepared for a break under 4900 by the ASX200 prior to any Christmas rally.
  • Considering the Emerging markets Index the more likely scenario looks to be a spike under 4900 followed by a strong rally to around 5400.
  • The Christmas rally still appears a strong possibility but with our upside targets now being more conservative. With the short position in the big four banks approaching a massive $3bn and BHP at its largest level in 4 years, from what level can we spring is the big question!

Chart of the week

The Emerging Markets look to be in a classic technical 5th wave, "abc", decline with the bearish trend targeting a further 10-15% fall prior to a strong rally. The AX200 is unfortunately highly correlated to the emerging markets index - see charts 21a & 21b.

Summary

Interestingly, when we look at the Market Matters portfolio it has performed quite well. That said while the market is doing its usual seasonal pullback it’s starting to feel a little uncomfortable so we would not be adding to positions at these levels.

Price action over the last 48 hours has forced us to turn neutral on the market as a whole. We will now wait for the market to more clearly show its hand.

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

What Matters this week

The ASX200 looks likely to open down 50 points on Monday after the large fall by overseas markets.

Potential Investing opportunities for the coming week

  • Market Matters advocates caution investing further cash at present.

Potential Trading for the coming week

  • Short term we recommend standing on the sidelines for a few days.
  • The main trading stock that still looks good at present is BHP ~$20.

Portfolio / Trade Holdings

Market Matters portfolio had a good week significantly outperforming the market with ANN, ANZ, BOQ and SEK all gaining on the week plus we bought BHP after the majority of its fall had occurred - the ASX200 fell 3.1%.

1. Ansell (ANN) +6% - medium term investment.

2. ANZ Bank (ANZ) +1.3% - medium term investment.

3. Bendigo Bank (BEN) -1.9% - medium term investment.

4. Bank of Queensland (BOQ) +2.4% - medium term investment.

5. BHP Billiton (BHP) -10.9% - short term investment.

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

7. Seek (SEK) +0.9% - medium term investment.

8. Suncorp (SUN) -1.2% - medium term investment.

9. Oil Search (OSH) -2.3% - short / medium term trade.

  • Cash for future purchases ~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 10-year Interest Rate Quarterly Chart

American Equities

The American indices experienced our anticipated correction, especially very sharply in August similar to 2011. The S&P500 rallied very quickly almost making fresh all-time highs, the current correction is not surprising at this point in time, but caution is warranted.

  • The Dow exceeded predicted target and now remains bullish targeting the 19,000 area.
  • The NASDAQ looks ok, but the false breakout to recent highs is a warning signal.
  • The more followed (by market observers and participants) S&P500 fell 2% short of our technical target during its pullback and a clear break of the current 2020 area will imply the corrective phase is not over.

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 have completed a decent correction with the clearest leads recently coming from the UK's FTSE, German DAX and Spanish IBEX. The European Indices are outperforming the US recently as further economic stimulus is anticipated by the ECB.

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 uncertainty in Chinese stock market and weakness / devaluation of the Yuan. Last Fridays interest rate cut in China failed to excite the equities this week.

Chart 20a – Hang Seng Weekly Chart

Chart 20b – China Shanghai Composite Index Weekly Chart

Chart 21a – Emerging Markets MSCI ETF Weekly Chart

Chart 21b – Emerging Markets MSCI ETF v ASX200 Weekly 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 interesting. We remain cautiously positive the “yield play” after its +20% correction. We're no longer bearish the resources sector from a risk / reward trading perspective and, in fact, some low-risk buying opportunities are close at hand.

Chart 23 – BHP Billiton (US) Monthly Chart

Chart 24 – BHP Billiton (BHP) Daily 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 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 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 initial technical target ~67-68c.

 Chart 59b– The $US Index Monthly Chart


Commodities

Gold is weak at present as it has rejected strongly the $US1200/oz resistance.

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 in August causing us to watch carefully for buying opportunities within the sector. Technically cautiously short term bullish from current levels.

Iron Ore remains mildly 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 Richard and the Market Matters team
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