Market Matters Report / The Hickman Report 15 March 2014

By Market Matters 15 March 14

The Hickman Report 15 March 2014

The Hickman Report 15 March 2014

______________________________________________________________________________________________________________________

Market Matters Summary for Saturday 15th March 2014


  • The ASX200 fell -2.3% last week and the Dow -2.4%, both falling on China and further Ukraine fears.
  • I believe the anticipated 6% correction in the US Indices has commenced, with another 4% remaining.
  • We recently had the 5-year anniversary of the US bull market, in which the S&P 500 has nearly tripled. We have seen a 16% & 13% correction in the NASDAQ during the 280% rally, I anticipate another +10% in mid-2014.
  • How far the ASX200 corrects in coming weeks is hard to estimate, my best guess is 2-3%. We are running our own race as is illustrated by NZ raising rates last week & people still talking cuts required in locally.
  • I reiterate, I’m a buyer of the current correction as I remain overall bullish for 2014, expecting a zigzag rally.
  • The domestic banks are the place to be at present, with dividends in May for ANZ, BOQ, NAB & WBC. Also, I believe analysts are significantly underestimating profit growth in 2014-15 which is exciting for investors.
  • As I mentioned the big 4 banks grow on average 5.7% in March / April since 1997 (www.probabilitytrader.com).
  • The resource stocks are simply too hard at present and for me only trading, not investment vehicles.
  • Recently, I bought Bank of Queensland (BOQ), targeting $13+ and a healthy dividend in May.
  • This week I am a buyer of Fairfax (FXJ) under 90c plus the market in general if the US falls another4% - likely adding to ANZ / BOQ & a seller Crown (CWN) $18.25+.


______________________________________________________________________________________________________________________

 


What Mattered Last Week

China concerns took over from political tensions in Ukraine, although it looks like these have not gone away. The Australian share market was full of “Iron Ore” talk after we saw an 8.3% fall in the commodity on Monday night.

  • While the domestic market feels fully valued in the 5,450 region, I feel the banks can comfortably go higher, especially if the pullback further into May dividends. Stock selection will remain vital in 2014 as the bull markets mature and investors focus on earnings.
  • I am not using current China concerns to look for investment opportunities in the resources sector.

On the performance front, the below stocks caught my eye last week:

  • Positive Performance from – Ansell (ANN) +0.8%, Newcrest +0.8%.
  • Negative Performance from - BHP -5.5%, FMG -8.3%, RIO -5.3%, Worley Parsons (WOR) -9.2%,
    1. Last week, we traded FMG for a 7-8% profit.
    2. Unfortunately it’s been very tricky remaining short the ASX200 for this pullback when we see rallies like Thursday’s 85 point gain.
    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 again have one eye on the domestic market and one on the US indices. I now have sell signals on the NASDAQ under 3,630 targeting sub 3,500 (-3.5%). I am a buyer of equities in general if / when we get this correction, likely ANZ & BOQ.
  • Locally as mentioned above, the resources have been both volatile and topical. We have traded Fortescue (FMG) successfully three times over the last 12 months, I now believe it’s time to step aside and await some clarity on China, especially as I am bearish on copper.
  • The uranium story has been catching my attention recently and I have been waiting for a good risk / reward opportunity to become a buyer as Japan restarts its reactors. I can try again, buy Paladin Energy (PDN) at 51c with stops under 48c as trade. NB the stock makes no $$ and pays no dividend.
  • The ASX200 remains tricky after a straight line +8% rally, I anticipate ongoing consolidation, with the 5,250 technical level looming.
  • 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, paying attention the US indices as stated above.
  • The major 4 Australian banks have averaged a 5.7% 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! (www.probabilitytrader.com)


Trading for the coming Week

  • I remain overall bullish for 2014, especially the US NASDAQ index, to date corrections have been short and sharp. I am focusing on the current unfolding weakness to generate buying opportunities in the domestic banks prior to May dividends.
  • I now am looking for a further 4% correction in US Indices, to start buying domestically.
  • I am still of the strong opinion that patience will be the key in 2014, as this 5 year bull market slowly matures and becomes very zigzag in nature.
  • I reiterate, investors should maintain a set plan for 2014, and profits must be taken at targets. E.g. Fortescue (FMG) has fallen 25% after reaching our major profit target.
  • With recent very choppy action, both profit & buy targets may be attained VERY quickly, see refined levels below, have orders placed in the market:
    1. Ansell Ltd (ANN) - $18.00 & $22.50 – Stops under $17.
    2. ANZ Bank (ANZ) - $28.50 & Sell calls into strength for sophisticated investors.
    3. CBA Bank (CBA) - $70 & $82.
    4. Crown Resorts (CWN) -$18.50 & $15.50. Stops under $13.70.
    5. Bank of Queensland (BOQ) - $11 & $13+.
    6. Fairfax (FXJ) 90c. Stops under 88c.
    7. Fortescue Metals (FMG) – $4.50 area – Stops under $4.
    8. Magellan Financial Group (MFG) – under $10 & take ½ profit over $13.
    9. REA Group (REA) Take ½ profit $50+.
    10. Resmed (RMD) under $4.50 – Stops under $3.80.
    11. CSL Ltd (CSL) – $60.
    12. Seek Ltd (SEK) Awaiting development, buy a $2 retracement.
    13. Woolworths (WOW) – $37 area I would be taking at least 1/2 $$ 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 large swings can feed on themselves.

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 months:

  • AWC, CSS, FRE, FXJ, KCN, KDL, LEI, OZL, PEN, & PDN – 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), Australian Banks (w), BOQ (m), 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: BHP (m), 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% correction for overseas markets. Also, the close correlation with the NZ market is a concern as it is shaping up 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 NZX50 Index Monthly Chart

 

Chart 8 – New Zealand 50 Index Monthly Chart

 


American Equities

The American indices have reached my sell levels after only a few weeks ago generating buy signals! However, any decent weakness in the US should be aggressively bought as both 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 – NASDAQ Monthly Chart

 

Chart 14 – NASDAQ Weekly 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, getting close.

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 with another +17% downside.

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 (NZ recently), which will lead to an eventual underperformance from bank / yield stocksthere is no sign of this at present.

I remain a comfortable buyer of bank stocks into any correction that send yields towards 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. I can see a likely scenario unfolding of bank underperformance after May dividends.


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 Bank (ANZ) Monthly Chart


Chart 33 – Westpac Bank (WBC) Weekly Chart


Chart 34 – National Bank (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, I am looking for another counter trend bounce towards 93c over coming weeks that may aid entry to stocks that benefit from $US earnings.




Commodities

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

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.


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, CWN, FRE, KDL, PDN, SUN & WBC.