Market Matters Report / The Hickman Report 15 February 2014

By Market Matters 15 February 14

The Hickman Report 15 February 2014

The Hickman Report 15 February 2014

Market Matters Summary for Saturday 15th February 2014

  • The ASX200 has had an amazing +300 point rally, without even a 40 point correction, over 8 very strong days.
  • Interestingly, the recent Christmas rally was 13 days / 330 points so the 5,400 area is my logical short term target.
  • There are no sell triggers yet in the ASX200, but risk / reward buying opportunities have clearly gone in 8 days.
  • As I have been repeating at nauseam, “Trading Plans” are a MUST for 2014 as opportunities will often be swift.
  • The rally has been led by the banks, as emerging market concerns have vanished as fast as they appeared.
  • The NASDAQ has made fresh 2014 highs, the S&P is close, I am now looking for SELL triggers in the US Indices.
  • I would sell the NASDAQ under 3,600 (2% lower) targeting 3,400 (over 7% lower).
  • If we get this downturn, the ASX200 is likely to follow, how far will depend on the catalyst for the correction.
  • I’m a buyer of any pending correction as overall I remain bullish for 2014.
  • I have believed banks will underperform in 2014, BUT at present they look excellent, led by my preferred two last week, Bank of Queensland (BOQ) (+7.7%) and ANZ (+6.4%).
  • I still feel soon, the lower / mid cap space will be the place to be as investors hunt for value – patience required.
  • I reiterate in 2014, be prepared to take all or part profit when stocks hit targets and after the recent 300 point surge some are on the horizon if the rally continues: BOQ, CWN, FMG, MGF, SUN & WOW.
  • Gold stocks continue to show excellent signs of a bottom; I remain comfortable buying any weakness especially after the $1,300 psychological resistance in Gold has clearly been breached.
 

What Mattered Last Week

Last week was explosive on the upside for equities, reversing the previous week’s sharp selloff with the ASX200 now challenging 5,400 resistance. Clearly the ASX200 is being linked with the Emerging Markets and the subsequent fluctuations they are experiencing.

  • On Friday night, the US Indices again rallied after average economic data giving us our largest weekly gain of 2014.
  • Precious metals had a phenomenal night, with silver +4.8% and gold +1.2%, gold approaching $US1,320 should get the sector excited on Monday.
  • Investors are attributing the poor data to severe weather conditions, this optimism may lead to weakness if economies are actually slowing.
  • Domestically, stocks shrugged negative influences including those from Bradken, Cochlear, Forge & unemployment data overall a positive indicator.
  • The very poor Australian unemployment data illustrates my larger concern around competiveness for the Australian economy going forward.
  • After last week’s poor US employment data, as expected support for the yield sector materialised.

 

What Matters this Week

  • The main focus in the coming week will be on company reports with market heavyweights AMP, BHP, Bendigo Bank, Brambles, Crown, Fortescue, IAG, Origin, Santos, Suncorp, Wesfarmers & Woodside all included in the list to front the market with results.
  • I am watching the US Indices closely as they have been technically clear and if this roadmap continues, a decent 7% correction is close at hand.
  • The ASX200 remains harder, but last week’s strength cannot be ignored and momentum is likely to lead us higher if until the US does correct.
  • CBA goes ex dividend on Monday and the price action will be interesting, as the stock now has the second largest short position at $984m.
  • Fortescue (FMG) has the largest short position in the index at $1.04bn (182m shares), this equates to 14 days turnover. An aggressive rally is easy to envisage if we see a good report this week – I hope so, as FMG is one of my core positions!
  • With the NASDAQ at fresh recent highs, I am looking out for short term sell signals. Ideally, the S&P will have a failed rally to new all-time highs – less than 1% to go.
 

Trading for the coming Week

 

  • I remain overall bullish for 2014, especially the US indices, the recent correction was complete very quickly, BUT I now am looking for a turn and another 7% correction soon. NB Also, I believe there will be more in 2014 including one likely well over 10%. 
  • I reiterate strongly that I am of the opinion that patience will be the key in 2014, as this bull market slowly matures and becomes choppy.
  • I will be investigating the small caps this week, and in weeks to come, watch for ideas – see chart 7 illustrating 52% underperformance.
  • The gold sector continues to unfold as anticipated and I remain a happy buyer of weakness in NCM and SLR. I feel Friday’s clear breach of $1,300/oz. was required to convince the none believers, next week should see some acceleration.
  • The NCM chart looks similar to the Spanish IBEX – chart 17, which has just rallied +70%. My NCM target remains at $14.
  • I reiterate, investors should maintain a set plans for 2014, recently we saw some great buying opportunities and now 3 weeks later profit targets are looking for some stocks. 
  • With some of the below stocks reporting this week, profit targets may be attained VERY quickly, they are in red below:
  1. ANN - $19 & $22.50.
  2. ANZ - $28.50 & sell calls into strength for sophisticated investors.
  3. CBA - $70 & $82.
  4. CWN -$18.50 & $16.
  5. BOQ - $11 & $13.
  6. FMG –under $5 & over $6.
  7. MFG – under $10.
  8. REA - $46+.
  9. RMD – under $4.50.
  10. CSL - $60.
  11. SEK - $10.75.
  12. WOW - $35 & $37.

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 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:

AWC, CSS, FXJ, KCN, KDL, LEI, OZL, PEN, PDN, & SLR – I own the ones underlined.

Market Matters’ View at a glance

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

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

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

Bearish: China (m), Copper (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 on both a daily / weekly basis. I am 50-50 right here.

I remain wary of the potential 8% correction for overseas markets and the weekly “rising wedge triple top” formation on chart 3, plus the close correlation with the NZ market which is looking for a 10% correction in 2014.


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 Small Cap Index Monthly Chart

 

Chart 8 – New Zealand 50 Index Monthly Chart

 


American Equities

The American indices are approaching my sell levels after two 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 200+ point correction.


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.


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, but positive on a weekly basis.


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 underperformance from bank / yield stocks.

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


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, BOQ, FMG, FRE, KDL, NCM, PDN, PEN, SLR & SUN.