Market Matters Report / The Hickman Report 1 March 2014

By Market Matters 01 March 14

The Hickman Report 1 March 2014

The Hickman Report 1 March 2014

 

______________________________________________________________________________________________________________________

 

Market Matters Summary for Saturday 1st March 2014

  • The ASX200 retreated 34 points last week while the Dow rallied 218 points, I feel the local market may be pre-empting the anticipated US correction after leading the strong rally in February.
  • There is no sell signal in the ASX200 currently but a close sub 5,400 is a clear warning & sub 5,335 confirmation.
  • The overseas markets are unfolding exactly as anticipated, we have our expected new 2014 highs in the S&P & NASDAQ, now I anticipate another 6-8% correction in the US Indices
  • If we get this downturn, the ASX200 is very likely to follow, how far will depend on the catalyst for the correction.
  • I reiterate I’m a buyer of any pending correction as overall I remain bullish for 2014 expecting a staircase rally.
  • I have believed the domestic banks will underperform in 2014 BUT at present they are strong and I now believe they will continue this trend into May’s dividends for ANZ, NAB & WBC. 
  • The major 4 Australian banks have averaged a 5% return for March & April since 1997 as locals buy and hold for the 45-day rule, to keep the attractive franking credits – a very hard statistic to ignore!
  • Hence the ASX200 may outperform any large overseas correction unless it’s China led & resources get smacked. 
  • However, the China Yuan fell the most since 2008 on Friday, this currency move combined with a doubling of investor cash leaving emerging Asia stock funds this week, feels like pending volatility approaching fast.
  • Individual stocks continue to trade with enormous volatility, yielding great opportunity and confirming my strong view that portfolio’s must be fluid in 2014. E.g. I recently I bought Crown (+4.5%) and sold Silverlake (-24%), Newcrest (unch.) and FMG (-11%). – 3 out of the 4 have moved significantly over the week since we traded.
  • This week I am a buyer of Fairfax (FXJ) under 90c, Newcrest around $10.50 & a seller of Crown (CWN) $18.25+. 

______________________________________________________________________________________________________________________ 


What Mattered Last Week

  • Company reporting again dominated the Australian share market last week. The ASX200 hit six-year highs on Tuesday prior to slowly retreating to close down under 1% for the week.
  • The domestic market simply feels tired up at 5,400+ and a number of large stocks have either hit my targets, or are within striking distance.

On the results front, the below caught my eye:

  • Positive results from – Bluescope (BSL). QBE, Ramsay Health Care (RHC) Whitehaven Coal (WHC) Worley Parsons (WOR), Perpetual (PPT) and James Hardie (JHX).
  • Negative results from - Atlas Iron (AGO), IOOF Holdings (IFL), Lend Lease (LLC) and QANTAS (QAN).
  1. There was no ideal stock opportunities last week. I am happy to have taken profit on Silverlake Resources (SLR) as we witnessed it fall 15% on Friday after another demonstration of directors destroying shareholder wealth – an institutional raising with no opportunity for shareholders to participate.
  2. Also, it was refreshing to see Fortescue (FMG) fall 13% from its highs after we sold out and our re-entry level is approaching fast.
  3. I remain positive Ansell at these levels for investors looking for a spread of holdings, a great switch out of Coca Cola (CCL) which I am bearish.


What Matters This Week

  • This week I will have one eye on the domestic market and one on the US indices. I get sell signals on the NASDAQ under 3,630 (-1.8%) targeting under 3,500 (-6%). Also, I will be monitoring any news flow from China very closely.
  • The uranium story is catching my attention and I am waiting for a good risk / reward opportunity to become a buyer as Japan restarts its reactors.
  • The ASX200 remains tricky after a straight line 8.1% rally, I anticipate ongoing consolidation, but the initial pullbacks are likely to continue to find plenty of buying appetite. A close for the ASX200 under 5,400 is an initial warning and under 5,335 bearish.
  • It feels like we have witnessed a lot of short covering locally e.g. Fairfax (FXJ) it was interesting to see this failed to continue when the ASX200 reached fresh 6 year highs.
  • As outlined above I am positive banks into the May dividends so any correction to February’s +10% rally I will become a buyer, levels will be refined if it unfolds in the morning reports.


Trading for the coming Week

  • I remain overall bullish for 2014, especially the US Tech indices, the recent correction was completed extremely quickly, with the ASX200 since rallying over 8% reaching fresh 6-year highs.
  • I now am looking for another turn and a 6-8% correction soon in US Indices; there are no confirmed sell signals yet. NB Also, I believe there will be more in 2014 including one likely well over 10%. 
  • I am still of the strong opinion that patience will be the key in 2014, as this bull market slowly matures and becomes very choppy.
  • I reiterate, investors should maintain a set plan for 2014, recently we saw some great buying opportunities and now a few weeks later profit targets are looming for some stocks
  • Recent company reports allowed me to take profit on Fortescue (FMG) and buy Crown (CWN). This relative switch has already moved over 15% in our direction.
  • With recent very choppy action, both profit & buy targets may be attained VERY quickly, see levels below, have orders placed in the market:
  1. ANN - $18.00 & $22.50 – stops under $17.
  2. ANZ - $28.50 & sell calls into strength for sophisticated investors.
  3. CBA - $70 & $82.
  4. CWN -$18.50 & $16.50. – stops under $13.70.
  5. BOQ - $11 & $13
  6. FMG –$4.50-5 area – stops under $4.
  7. MFG – under $10 & take ½ profit over $13.
  8. REA – take ½ profit $48+
  9. RMD – under $4.50 – stops under $3.80.
  10. CSL - $60
  11. SEK – awaiting development, buy a $2 retracement.
  12. WOW - $37 area – I would be taking $$ now.

N.B. I am remaining patient on buying / selling price levels, a lot of people are choosing the same stocks with offshore earnings exposure for 2014-2015, hence retracements can feed on themselves as we saw recently with Crown (CWN).

A list of some sleepers are below, some have already started to show signs of life, we will look to continually add to this list over coming weeks:

  • AOC, AWC, CSS, FRE, FXJ, KCN, KDL, LEI, OZL, PEN, & PDN – I own the ones underlined.
  • I am looking to buy Fairfax (FXJ) December 95c calls under 10c, or stock under 90c.


Market Matters’ View at a glance

The below views are illustrated in detail by the charts beneath.

Bullish: ANN (m), Australian Banks (w), BOQ (m), BHP (d), CBA (m), CSL (m), CWN (m), Dow (m), FTSE (w), Gold (w), IBEX (m), NASDAQ (m), NCM (w), Nikkei (m), REA (w), SEK (m), S&P (m) & SUN (m).

Neutral: AMP (w), ASX200 (d), BEN (m), BHP (w), Hang Seng (w), FMG (w), IBEX (w),NZ (w), QBE (m), Retail Index (w), RIO (w), S&P (w) STOXX (w) & WES (w).

Bearish: China (m), Copper (m), US Indices (d), WOW (m) & WPL (m).

  • Time Frames - (d) = daily, (w) = weekly and (m) = monthly.

e.g. A (d) implies I am bullish on a daily basis but a (m) would mean I am bearish on a monthly / longer term basis.

 

Australian ASX200

I am bullish on a monthly basis, but neutral / bearish on both a daily / weekly basis as I look for a 6-8% correction for overseas markets. Also the close correlation with the NZ market is a concern as it is looking for a 10% correction in 2014 (chart 7).

Chart 1 – ASX200 Monthly Chart

 

Chart 2 – ASX200 Weekly Chart

 

Chart 3 – ASX200 Weekly Chart

 

Chart 4 – ASX200 Daily Chart

 

Chart 5 – SPI (Share Price Index) Futures 60 mins Chart

 

Chart 6 – Volatility Index VIX Weekly Chart


Chart 7 – ASX200 v New Zealand Index Monthly Chart

 

Chart 8 – New Zealand 50 Index Monthly Chart

 

American Equities

The American indices are approaching my sell levels after only a few weeks ago generating buy signals! However, decent weakness in the US should be aggressively bought as the monthly set ups and growing economies are overall bullish.

The NASDAQ (and DAX) is the clearest index and the most bullish, I remain an aggressive buyer of the next 220+ point correction in the NASDAQ.

Chart 9 – Dow Jones Index Monthly Chart

 

Chart 10 – Dow Jones Index Daily Chart

 

Chart 11 – S&P 500 Monthly Chart

 

Chart 12 – S&P 500 Weekly Chart

 

Chart 13 – Russell 3000 Index Weekly Chart

 

Chart 14 – NASDAQ Monthly Chart 


European Indices

The European indices now look net bullish for 2014, with the FTSE in a classic 3-4 consolidation prior to an assault on the 7,000 level. The Dax looks very bullish and similar to the NASDAQ, any 900 point retracement should be bought, likely after testing 10,000 first.

Chart 15 – Euro Stoxx 50 Weekly Chart

 

Chart 16 – FTSE Weekly Chart


Chart 17 – Spanish IBEX 35 Monthly Chart


Chart 18 – Spanish IBEX 35 Weekly Chart

 

Chart 19 – German Dax Monthly Chart

 

Asian Indices

Asian indices remain net positive, but messy short term. The Nikkei continues to be volatile and is now threatening a decent correction.
The China Index remains bearish long term.

Chart 20 – Hang Seng Weekly Chart

 

Chart 21 – China Shanghai Composite Monthly Chart

 

Chart 22 – Japanese Nikkei 225 Monthly Chart

 

Australian Stocks

Buying sustainable yield and selling XJO calls has been a logical strategy over recent years. However, the risk of rising bond yields has resulted in me now recommending a more balanced portfolio, after being heavily weighted to the banks – my view is that the next major move in rates is up, which will lead to an eventual underperformance from bank / yield stocks – no sign of this at present.

I remain a comfortable buyer of bank stocks into any correction that send yields well over 6% and writing stock specific calls. However, recent attractive 6.2% yields may need to be 6.5% in 12 months’ time.

Any correction in coming weeks should be bought as we seasonally enter an excellent period for the big 4 Australian banks with May dividends approaching.

Chart 23 – BHP Weekly Chart

 

Chart 24 – BHP Daily Chart

 

Chart 25 – Woodside (WPL) Monthly Chart

 

Chart 26 – RIO Weekly Chart

 

Chart 27 – FMG Weekly Chart

 

Chart 28 – Vale (US) Weekly Chart

 

Chart 29 – Newcrest Mining (NCM) Monthly Chart

 

Chart 30 – Australian Retail Index Monthly Chart

 

Chart 31 – CBA Monthly Chart


Chart 32 – ANZ Monthly Chart


Chart 33 – WBC Weekly Chart


Chart 34 – NAB Weekly Chart


Chart 35 – Bendigo Bank (BEN) Monthly Chart

 

Chart 36 – Bank of Queensland (BOQ) Weekly Chart

 

Chart 37 – AMP Weekly Chart

 

Chart 38 – Suncorp Group (SUN) Weekly Chart

 

Chart 39 – Insurance Australia (IAG) Monthly Chart

 

Chart 40 – QBE Insurance Monthly Chart


Chart 41 – Magellan Group (MFG) Weekly Chart

 

Chart 42 – Wesfarmers Ltd (WES) Weekly Chart


Chart 43 – Woolworths Ltd (WOW) Monthly Chart


Chart 44 – Seek Ltd (SEK) Monthly Chart

 

Chart 45 – Real Estate Australia Group Ltd (REA) Monthly Chart

 

Chart 46 – Crown Resorts Ltd (CWN) Monthly Chart

 

Chart 47– Ansell Ltd (ANN) Monthly Chart

 

Chart 48– CSL Ltd (CSL) Monthly Chart

 

Chart 49– Resmed (RMD) Weekly Chart

 

Chart 50 Fairfax Media FXJ Monthly Chart



Chart 51– Australian Dollar (AUD) Weekly Chart

The $A is looking very heavy, October’s bounce was a little greater than anticipated breaking 97c, renewed weakness now looks to be unfolding with an ultimate target of 80-82c; clearly benefiting stocks with offshore earnings.




Commodities

Gold looks to have commenced a strong rally towards the 1,400 area.

Copper remains negative on a longer term basis, a very similar chart pattern to Newcrest Mining and unfortunately we all saw what happened there.

Chart 52 – Gold Monthly Chart


Chart 53 – Copper Monthly Chart

 

 

Please note this is my personal TECHNICAL opinion of markets and "General Advice" taking no account of individual’s circumstances.

Have a great week,

Shawn Hickman

Reports and other documents published on this website (‘Reports’) are authored by Market Matters independently of Shaw Stockbroking Limited (‘Shaw’). The Reports represent the views of Market Matters and those views may be contrary to views expressed by Shaw, Shaw Research and Shaw advisers. The Hickman Report is 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 Market Matters 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.
The author holds an interest in the financial products of ANZ, AOC, CWN, FRE, KDL, PDN & SUN.