Market Matters Report / The Hickman Report - Monday 6th April 2015

By Market Matters 06 April 15

The Hickman Report - Monday 6th April 2015

The Hickman Report - Monday 6th April 2015

Afternoon All,

A belated Happy Easter to all our subscribers, I feel totally refreshed after 6 great days with the family in Port Douglas; it certainly reminded me of what an amazing country we are fortunate to live in.

The ASX200 has remained in a relatively tight range between 5997 and 5749 for the last 23 trading sessions; I feel this week is time to show its hand. Tomorrow at 230pm the RBA will announce whether they have decided to cut interest rates to 2%. Interestingly over the last week the market has gone from 50-50 to a 73% expectation of a cut = potential room for disappointment. However, the main belief it’s simply a matter of when with the futures factoring in a second cut to 1.75% by Christmas.
It’s not surprising the yield play remains in vogue with the “safest bank” CBA paying a fully franked yield of around double an unfranked 90-day term deposit. As I have been writing over recent weeks I am looking to switch my portfolio which has been predominantly yield chasing to a combination of both yield and growth BUT no resources. April is an extremely strong month seasonally both locally and in the US where it’s the strongest month of the year for the Dow. Obviously statistics are only a market indication but CBA has never been down in April since the 45-day holding rule was introduced for franking credits.

• I remain bullish the ASX200 short term targeting around 6100 around 3.5% higher but unfortunately after this push I believe a 10% correction is a strong possibility.

If the RBA disappoints tomorrow and the Dow continues to struggle to punch through 18,000 then the pullback may be sooner but my preference remains a rally first. A few stock situations have caught my eye recently I will consider closely next week:

1. The REITS remain bullish targeting fresh 2015 highs (chart 5) e.g. Westfield towards $11 ~8% higher, see chart 49.
2. Oil stocks have again been slammed with Santos trading at multi-year lows last week. I am again bullish the sector for a trade targeting a 10% rally minimum from levels in both stocks and Oil itself.
3. Iron Ore clearly looks awful and my long term view of BHP remains negative but I feel “in my gut” that short term the sell-off is overdone. It was interesting to see an almost 6% rally in Vale (chart 28) after its opening on Friday night. While I am in damage control on my FMG April 190 Calls (average stock entry $1.85) I will not panic out in the morning – watch for alerts.
4. Bank of Queensland (BOQ) – BOQ is my favourite bank at current prices in the sector especially with a 36c fully franked dividend due on 16th April. Overall I am a drip feed seller of banks into fresh all-time highs.
5. AMP recently a great reflection of the market looks very bullish targeting +5% gains from current levels.
6. iiNet (IIN) – It currently feels like there is a 50% chance of an increased bid for IIN, perhaps MTU offering a script bid being a logical candidate.
7. Fairfax still looks bullish targeting around $1.10 ~10% higher.
8. Dare I mutter the stock we have all hated for the last 2 years – Myer (MYR)? Technically I could buy MYR for a trade around $1.10 fresh all-time lows, but note this is 15% below current levels.

Summary:

1. I still believe the ASX200 will push towards 6100 over coming weeks, likely driven by the “yield play” but I will be selling this strength if it occurs.
2. Sell part of my overweight (ex div.) CBA /NAB plus other stocks into any strong gains.
3. For traders – (a) Watch FMG price action very carefully next week (b) I believe aggressive traders can again buy STO and WPL for decent gains.

*Watch for alerts next week.


What Matters this week

The ASX200 open will be determined by overseas movements tonight plus RBA talk. 


 

Potential Investing opportunities for the coming week

I am looking to be a seller of equities around 6100 but specifically banks into fresh all-time highs.

Potential Trading for the coming week

• I will watch FMG very closely having been guilty of giving the position too much room recently but I still believe the stock will bounce from current levels.
• Traders can buy the oil sector via options, or stock, tomorrow looking for another short covering rally.


 

Portfolio Holdings

My portfolio underperformed last week, the ASX200 rallied 0.65% courtesy of my overweight bank holdings. Fortunately the STO trading position helped nicely.

1. Bank of Queensland (BOQ) +0.88% - medium term investment – note I purchased on Friday.
2. Challenger (CGF) +0.71% - medium term investment.
3. Commonwealth Bank (CBA) +1.16% - Long term investment.
4. IINet (IIN) +1.5% situation stock.
5. National Australia Bank (NAB) +0.68% - Medium term investment.
6. Vocus (VOC) +1.2% - Medium term investment.

• Cash for future purchases, ~10%.

NB I do not mention “trades” in this section as I only risk 1-2% generally in my trades.

Australian ASX200

I continue to look to spread my portfolio into more growth stocks in coming weeks/months and cash.

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 5 ASX200 REIT Index Monthly Chart

Chart 6 Volatility Index VIX Weekly Chart

Chart 7 – The US 10-year Interest Rate Monthly Chart

 

American Equities

The American indices continue to show signs of topping out for 2015 but a final blow-off now feels likely led by the previously poor performing Russell 2000 Index as opposed to the S&P500.

Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Dow Jones Index Daily Chart

Chart 10 – S&P500 Monthly Chart

Chart 11 – NYSE Composite Index Monthly Chart

Chart 12 – Russell 2000 Index Monthly Chart

Chart 13 – NASDAQ Weekly Chart

Chart 14 – The Canadian Composite Monthly Chart

 

European Indices

European Indices still look set to rally another 2-3% aided by ECB stimulus.

Chart 15 – Euro Stoxx 50 Weekly Chart

Chart 16 – FTSE Weekly Chart

Chart 17 – Spanish IBEX Monthly Chart

Chart 18 – German DAX Monthly Chart

Chart 19 – German DAX Daily Chart

 

Asian Indices

Asian indices are neutral at present. However, China remains very bullish as it opens its market to offshore investors and Japan is receiving great strength from ongoing aggressive QE.

Chart 20 – Hang Seng Weekly Chart

Chart 21 – China Shanghai Composite Monthly Chart

Chart 22 – Japanese Nikkei 225 Monthly Chart


Australian Stocks

Quality stocks with sustainable yield have been standouts but some industrial stocks that are now looking good. Overall I am now a net seller of the “yield play”.

Chart 23 – BHP (US) Monthly Chart

Chart 24 – BHP Weekly Chart

Chart 25 – Woodside (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 30 – Regis Resources (RRL) Weekly Chart

Chart 31 – Barrick Gold Corp. (US) Monthly Chart

Chart 32 – CBA Quarterly Chart

Chart 32b – CBA Daily Chart

Chart 33 – ANZ Bank (ANZ) Monthly Chart

Chart 34 – Westpac Bank (WBC) Weekly Chart

Chart 34b – Westpac Bank (WBC) Daily Chart

Chart 35 – National Bank (NAB) Weekly Chart

Chart 36 – Macquarie Bank (MQG) Weekly Chart

Chart 37 – Bank of Queensland (BOQ) Weekly Chart

Chart 38 – 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 Monthly Chart

Chart 43 – Wesfarmers Ltd (WES) Weekly Chart

Chart 44 – Woolworths Ltd (WOW) Quarterly Chart

Chart 45 – Seek Ltd (SEK) Weekly Chart

Chart 46 – Telstra (TLS) Monthly Chart

Chart 47– M2 Group Ltd (MTU) Monthly Chart

Chart 48 – 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 - Fairfax Media (FXJ) Monthly Chart

Chart 54 – Crown (CWN) Monthly

Chart 55 – Coca-Cola Amatil (CCL) 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

I am now neutral Gold as rising interest rates could easily derail the recent strength. I have divergence with the stocks looking average but the precious metal constructive.

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 remains negative but I believe we now see a strong rebound towards $US55/barrel.

Iron Ore is 50-50 here BUT the trend is clearly down.

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

Have a great week,

Shawn Hickman
marketmatters.com.au

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The author holds an interest in the financial products of BOQ, CBA, CGF, IIN, FMG, KDL, NAB, and VOC.