Market Matters Report / MarketMatters Report Saturday 1st August 2015

By Market Matters 01 August 15

MarketMatters Report Saturday 1st August 2015

MarketMatters Report Saturday 1st August 2015

Afternoon all

The ASX200 enjoyed a strong week rallying 2.4% with gains across all sectors, following the largest gains in US stocks since February, the momentum feels good and higher prices look likely short term. Simply when bad market news fades the ASX200 rallies well clear of the 5400 area that we deem to be fair value. This makes total sense with interest rates at historically low levels. We still believe that US indices are likely to see fresh highs in 2015 plus a number of Australian stocks, below illustrates the breakdown of stocks and markets that appear technically clear around pivot points:


Headed for fresh 2015 highs - ASX200 REIT's, US indices, German DAX, Nikkei, AMP, TLS, MTU, TPM, VOC, WFD and RHC - 11 candidates.

Already topped out in 2015 - ASX200, ASX200 Banks, ASX200 Finance, UK FTSE, Spanish IBEX and AMC.

When we consider the blue list of 11 markets above and take a simple glance at the daily ASX200 chart (chart 3) the 5850 area appears to be looming for the local market ~2.5% higher. Amcor (AMC), one of the market darlings in 2015, recently hit our targeted fresh 2015 high and rejected the level strongly falling 5.9% in 6 days, this is exactly what we are expecting from a number of markets in the approaching weeks and months. However, our medium-term view remains clearly in place for a 10-15% correction from US equities and flexibility must be exercised within this short-term bullish view. A break back below last week's low of 5531 will again turn us negative the overall market.

· Over coming weeks we will monitor closely the above 11 markets in the above "blue row", ticking them off as they achieve our targets.

Interest rates are sending some very conflicting messages to the market but overall they remain one of the most important influences on share prices as we illustrated recently with the strong correlation between bank shares and Australian 3-year bond prices. Markets are currently very comfortable with both interest rates and bond yields:

1. Hedge fund bets are at 2-year highs implying they believe that interest rates will not rise fast / soon in the US and basically no inflation exists.
2. Interest rates are rising for Australian consumers as banks pass on the cost of APRA to their customers.
3. Australian short-term rates for late next year are pointing to higher rates, in 12 months time, not lower like the press.

We will keep our ears and eyes wide open looking for potential catalysts for the correction which we are anticipating but all has gone quiet on the news front at present......

Our views at a glance:

1. US equities will correct 10-15% in the relatively near future, ideally after making a final 2015 first.
2. Australian resource stocks are interesting at present for countertrend bounces. However, the trends remain bearish.
3. Commonwealth Bank (CBA) will trade between $75 and $95 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 very close to completion.
5. We believe gold is very close to an aggressive countertrend rally.
Any subscribers not familiar with codes or companies can check these on the ASX website: http://www.asx.com.au/ - See charts of all below.

Summary:

No major change here:

1. We will remain patient on further purchases and now have our seller's hat in place.
2. We continue to have no interest investing in the resources sector but trading opportunities are now being targeted.

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

What Matters this week

The ASX200 looks likely to open down around 15-points on Monday.


Potential Investing opportunities for the coming week

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

· We are currently wearing our seller's hat looking to increase these cash positions.
· We are sellers of Vocus (VOC) into fresh 2015 highs.

Potential Trading for the coming week

· Short term we are still looking for short term selling opportunities around 5850, especially if the banks are going to struggle.

· For aggressive traders / investors we are long FMG, NST and Regis Resources (RRL).



Portfolio / Trade Holdings

Our portfolio had a very solid week, beating the overall market, the ASX200 rose 2.4%.

1. Challenger (CGF) +2.7% - medium term investment.
2. Commonwealth Bank (CBA) +2.0% - long term Investment.
3. Seek (SEK) +2.7% - medium term investment.
4. Vocus (VOC) +3.7%- Medium term investment.
5. Woodside (WPL) +5.9% - medium term investment.

· Fortescue (FMG) October 1.75 Calls - Trade.
· Regis Resources (RRL) and Northern Star Resources (NST) - Trade.

• Cash for future purchases, ~14%.

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 5c 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 continue to show signs of a topping pattern for 2015 but our preferred scenario is one fresh high for 2015.

Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Dow Jones Index Daily Chart

Chart 10a – US S&P500 Index Monthly Chart

Chart 10b – US S&P500 Index Daily 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

European Indices feel to be in the middle of a decent correction with clearest leads 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 18a – German DAX Index Monthly Chart

Chart 18b – German DAX Index Weekly Chart


Asian Indices

Asian indices have been extremely volatile over recent weeks on the back of a plunging Chinese market, we believe this represents a good long term, albeit aggressive, buying opportunity. However, the Nikkei looks technically a sell into fresh 2015 highs.

Chart 20 – Hang Seng Weekly Chart

Chart 21 – China Shanghai Composite Index Monthly Chart

Chart 22 – Japanese Nikkei 225 Index Monthly Chart


Australian Stocks

Quality stocks with sustainable yield have been standouts but some industrial stocks are now looking better. We are no longer am a net seller of the “yield play” after its 15-20% correction and looking to invest in growth / yield stocks BUT not resources. However, we're no longer bearish the resources sector from a risk / reward 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 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 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) Daily Chart

Chart 33 – ANZ Bank (ANZ) Monthly Chart

Chart 33b – ANZ Bank (ANZ) Daily Chart

Chart 34 – Westpac Bank (WBC) Weekly Chart

Chart 34b – Westpac Bank (WBC) Daily Chart

Chart 35 – National Australia Bank (NAB) Weekly Chart

Chart 36 – Macquarie Group (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 45a – 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 59– Australian Dollar (AUD) Weekly Chart


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



Commodities

We are looking for Gold to reverse back up aggressively in coming weeks.

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's ended very quickly, we still expect renewed weakness over coming months to make fresh 2015 lows but interesting the energy stocks look ok.

Iron Ore remains positive for a countertrend bounce.

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,
MarketMatters Team


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