Morning Report / New Year’s Eve Update

By Market Matters 31 December 18

New Year’s Eve Update

Market Matters Morning Report 31st December 2018

NB MM daily reports will recommence on the 14th January however we will continue to send live alerts if / when we transact in the market, plus the odd ad hoc report if the market warrants it.

What a month, MM has been looking for a Christmas rally for most of December but to no avail only for the last day 4-trading days to produce an explosive 244-point / 4.5% advance with the futures now suggesting the month will actually close positive – certainly doesn’t feel like it!

Todays quick unscheduled report is to ensure subscribers remain across our views as global stock markets experience some of their greatest volatility in recent times plus importantly a snapshot of what are we looking to do from here and why.

The ASX200 has now corrected 15% from its August high and although we still believe the index will look under 5000 in 2019 / 2020 there are likely to be enormous opportunities available in both directions in the months ahead – we believe it’s going to be a time to consider investing outside of the “comfort zone” which is perfect for the active investor who is prepared to buy weakness and sell strength.

Firstly the ASX200 is tricky in the short-term hence we will use the US indices for signs of a roadmap because it has certainly been the “tail that wags the dog” during the recent decline, importantly, we do anticipate a net upside bias over the next 6-months, albeit a choppy one.

ASX200 Index Chart


The US S&P500 has so far corrected 594-points / 20% from its all-time September high. Our preferred scenario from here is in 2 halves:

1 – The S&P500 makes one final low to complete the recent leg lower, ideally down towards 2300 i.e. over 7% lower.

2 – After this final washout (which is easy to comprehend after Decembers sharp decline) I can see a larger recovery playing out.

Hence the important takeout is MM wants to be flexible and in a position to buy weakness if the above unfolds.

US S&P500 Index Chart


The MM Platinum Portfolio

Potential selling

The MM Platinum Portfolio’s cash level is now 8% following our sale of Suncorp (ASX: SUN) last week. We have been planning to sell into strength for most of December and although the ASX200 is not ~5900 as we hoped we are still getting a late Christmas rally to end the year – a regular phenomenon because it makes fund managers performance look better, they simply stop selling!

As we consider increasing cash levels further in anticipation of buying at lower levels there are 3 groups of stocks we are considering offloading:

1 – Stocks we no longer wish to hold moving forward e.g. Suncorp (ASX: SUN).

2 – Stocks that have hit our targeted sell areas e.g. Xero (ASX: XRO) around $44.

3 – Stocks that may get an exceptionally strong push into the end of 2018 because they are largely held by fund managers e.g. CSL Ltd (ASX: CSL).

By definition the stocks we are looking to buy, ideally into weakness, need to be preferable to the ones above to make the exercise logical i.e. a portfolio “spring clean” to start 2019.

MM’s potential / likely sell list for next week:

1 - Xero (ASX: XRO) close to $44.

2 – CSL Ltd (ASX: CSL) above $190.

3 – iShares Emerging markets ETF (IEM) above $56.

4 – Ramsay Healthcare (ASX: RHC) above $58.

We put a lot of money to work into Octobers panic selling which was essentially around todays level for the ASX200 hence while its felt like a tough month, the damage has been less dramatic than the 15% decline we’ve seen by stocks over the last 3-months.

CSL Ltd (CSL) Chart

Potential buying

We’ve outlined earlier how we see markets evolving into 2019 hence we need a shopping list for one final attempt lower by local stocks as we look to tweak the MM Platinum Portfolio over the coming weeks, ideally helped by a final spike lower into January – note it will be very easy for equities to regain their bearish sentiment.

We are looking at 2 groups of stocks to buy:

A – Those that we have been waiting to buy into weakness.

B  – Those that have bounced well over the last 5-days implying no selling at these lower levels.

Currently some of our favourite stocks into weakness from Fridays close are:

1 – Cleanaway Waste (ASX: CWY) $1.71.

2 – Macquarie Bank (ASX: MQG) $108.59.

3 – New Hope Corp (ASX: NHC) $3.32.

4 – A2 Milk (ASX: A2M) $10.50.

5 – NIB Holdings (ASX: NHF) $5.20

6 – Altium (ASX: ALU) $20.92 -  below $20.

NIB Holdings (ASX: NHF) Chart



MM is looking to rejig our Platinum Portfolio as described above i.e. increase cash position into the recent strength to enable us to aggressively buy a test of December lows led by the US markets.

NB Markets are volatile and extremely fluid at the moment so we must / will remain flexible on what comes next.

Happy New Year

James & the Market Matters Team


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, or after the session when positions are traded.


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 31/12/2018

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