Market Matters Report / Market Matters Weekend Report Sunday 23rd April 2017

By Market Matters 23 April 17

Market Matters Weekend Report Sunday 23rd April 2017

Market Matters Weekend Report Sunday 23rd April 2017

The ASX200 has traded in a very choppy manner through April which overall is no great surprise with many market players taking holidays / extended weekends courtesy of Easter and now Anzac Day. So far April the seasonally strongest month of the year is not living up to its reputation, trading marginally negative basis Fridays' close. However when we consider what the ASX200 has had thrown at it over recent weeks being basically unchanged is a pretty decent result - The Dow has corrected almost 800-points (3.7%), both our Telco's and resources have been smacked plus geo-political tensions are very elevated courtesy of Syria, North Korea and now the French election.

However a strong finish to the month is definitely a strong possibility if the French election throws up no extremist surprises and Donald Trump delivers on his "massive tax cuts" which should be unveiled next week. Statistically the ASX200 should reach either ~6025 or 5725 by the end of April, hence the last 5 trading days of this month might be a lot busier than we have experienced over the Easter period.

At MM we have been far busier than usual with our portfolio but we did flag this likely trend as the large bull market which commenced in March 2009 slowly matures - this is not a time to buy and hold. We have moved to 15.5% in cash with only our holding Platinum (PTM) position frustrating us at present. Interestingly when you look at our current portfolio holdings the oldest 6 positions are all showing good profits which reminds us of 2 important adages of successful trading, they basically mean the same thing:

1. Run your profits and cut your losses /  Look after the problems and good stuff will look after itself.

https://www.marketmatters.com.au/blog/post/market-matters-portfolio-21st-april-2017/

Today we will outline a few stock / sector switches we are considering over coming weeks / months:

ASX200 Annual Seasonal Chart

The Australian banks have significantly outperformed their American counterparts over the last 8-weeks, a nice change! US banks have corrected ~11% while our banks are only 1.5% below their 2017 high. Looming May dividends for ANZ, NAB and WBC are certainly a large contributor to this recent period of outperformance, however it should be remembered our banks seasonally have a pretty rough time through May / June. Our current thought process around the banks in the MM portfolio:

1. If our banks rally into May, take an over 25% profit on our 5.5% holding in CBA ~$87.

2. Look to switch our 8% holding in ANZ to CBA, after ANZ has traded ex-dividend on the 12th of May. The switch may occur over a few weeks, not on the same day.

3. We would be looking to end up with a larger CBA position than we hold today, targeting its next dividend in August, say ~10%.

The twofold aim being to have a reduced bank exposure through May / June while maintaining a maximum exposure to fully franked dividends during 2017 - hope that makes sense!

Commonwealth Bank (CBA) Monthly Chart

ANZ Bank (ANZ) Weekly Chart

Next week will herald 100-days of Donald Trump as President of the US, who would of thought that was possible 5-years ago? It's hard to imagine the new president not wanting to "smash it out of the park" with his much heralded tax cuts next week, especially after recent his frustration around the planned healthcare changes. Also, it should be noted on a stock level we have 40% of the S&P500 reporting next week which should create plenty of volatility on the stock / sector level, as opposed to the index level.

We remain bullish US equities short-term ideally targeting ~21,500 for the Dow (+4.6%) and 5600 for the NASDAQ (+3%) prior to a decent 5% correction - May / June?

Hence if we see a strong rally from US stocks over the coming 1-2 weeks we will certainly be targeting some selling within our portfolio - this may not eventuate but plans need to be made for potentially ideal execution.

US NASDAQ Weekly Chart

Resource stocks have endured had tough time recently with most correcting at least 15-20% following the large declines in the likes of iron ore and copper. However we continue to believe this is an opportunity to buy back into the cyclical sector which could very rapidly come back into vogue if markets again become confident with the global economy.

We currently hold positions in BHP and RIO plus a trading holding in OZL. Last week we attempted to average our RIO holding under $58 but just missed out.

This week we will continue to look for good entry levels, including considering averaging our OZL trade position with copper having reached our $US250/lb targeted support area.

RIO Tinto (RIO) Weekly Chart

Lastly moving onto the topical Telstra which has now corrected over 40% since its dizzy heights well over $6 in 2015. Many financial planners will have pushed their clients into this "safe high yielding stock".....alas this has become the ultimate lesson that a high yield does not necessarily generate a net high return. Remember our only holding which we are unhappy with, Platinum Asset Mgt. (PTM) yields 6.4% fully franked but we are still behind on our investment.

Moving back to TLS our "gut feel" is it has entered a fresh trading range from $3.75 to $4.30, obviously a few more weeks is required to clarify this first impression but if we are correct there will be some excellent opportunities moving forward to  pick up some relatively low risk excellent dividends for the next 1-2 years.

Telstra (TLS) Daily Chart

Standout technical chart (s) of the week

We have been successfully active in the Gold Sector a number of times over recent months and we are again laying plans. We recently sold out of our positions in the sector within "ticks" of the highs looking for a 15-20% correction to renter. So far Regis Resources (RRL) has followed our script beautifully falling ~13% in just 2 weeks. Our plans into May:

1. Buy RRL on any weakness down towards $3.

2. Increase our Newcrest (NCM) position in the $21 area.

Regis Resources (RRL) Weekly Chart

Summary

We continue to believe that US and local stocks can add to their recent gains into 2017, and potentially 2018. Ideally over coming 1-2 weeks equity markets can rally allowing us to reduce our market exposure prior to the May / June period. Our thoughts at present:

1. Sell CBA around $87 over next 1-2 weeks, see above for following thoughts.

2. Buy RRL ~$3 and potentially RIO / OZL into decent weakness.

3. Watch and evaluate PTM very closely.

Bigger picture we continue to believe the ASX200 will break over 6000 in 2017.

What Matters this week

The ASX200's is set to open unchanged on Monday, the market is very likely to become "thin / illiquid" into ANZAC Day as markets search for direction following the French election.

Potential Investing opportunities for the coming week(s)

We are considering buying RIO, OZL and gold's into weakness while we are looking to sell CBA ~$87 and are watching PTM very closely.

* Watch out for trading alerts.

Potential Trading opportunities for the coming week

We are buyers of OZL around $7.

* Watch out for trading alerts.

Portfolio / Trade Holdings

The Market Matters Portfolio as of today is below, we are now holding 15.5% in cash. We have been more active than usual over recent weeks/ months which is to expected as this major bull market evolves, we are looking to buy gold's / resources into weakness, lighten banks if we make fresh sector highs in coming weeks while Platinum is our only stock of major concern at present.

https://www.marketmatters.com.au/blog/post/market-matters-portfolio-21st-april-2017/

Weekend report Charts / Chart Pack

The Market Matters Weekend report charts can be found below:

https://www.marketmatters.com.au/chart-pack/

Disclosure

Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday.

Disclaimer

All figures contained from sources believed to be accurate.  Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy.  Prices as at 22/04/2017. 5.00PM.
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