Market Matters Report / The Hickman Report - Saturday 14th March 2015

By Market Matters 14 March 15

The Hickman Report - Saturday 14th March 2015

The Hickman Report - Saturday 14th March 2015

Afternoon All,

The ASX200 disappointed on Friday, ignoring an overnight rally in the US and daily strength from Japan and China. Money is being aggressively moved from the US to equity markets that are enjoying fresh QE ultra-low interest rates, this trend was again very evident last week with investors currently “on the fence” about Australia’s timing for the next move in rates - Last week the ASX200 was -1.4%, the Dow -0.6%, the German DAX +3% and the Nikkei +1.5%. Unfortunately the noticeable local underperformance is likely to continue early next week with Crude Oil down 4.7%, Iron Ore 0.5% and BHP – 59c on Friday night.
I am 50-50 whether the local market will see a break under last week’s 5,749 low, prior to commencing a rally towards 6200. Interestingly on Friday, we disappointed, but at night on SYCOM (night trading futures), in the face of the above negative influences and a weak DOW, the market is only pointing to a fall of 10 points on Monday morning. As discussed last week, for my target of 6,200 to become reality, we need a decent bounce from the energy/resources sectors and the banks to make fresh 2015 highs. Importantly I can see decent tradable lows in these sectors shortly:

Last week I went long Fortescue Metals (FMG) via April $1.90 calls targeting a +50c bounce – see chart 27. I will look at add to this position around $1.80 if the opportunity arises. This is not just a technical trade targeting a bounce in a stock that has fallen 60% in 12 months. The debt markets have recently sold the yield on the company’s bonds from over 10% to around 7.25%, this vote of confidence in FMG suggests a rally in the stock.
• Friday's report around oil stocks is looking on the money at present after last night’s 4.7% fall in oil. I am targeting a rest of the $US40/barrel level in Oil, prior to a rally well over $US50/barrel. Watch for trading alerts in this sector.

A decent amount of dividend monies will be paid to investors over the next few weeks led by CBA, BHP and Telstra. The historically strong seasonal period we are now entering is clearly aided by a percentage of these funds being ploughed back into the market, especially with term deposits paying the lowest rates in history.
The other major news last week for subscribers was the takeover of IINet (IIN), by TPG Telecom (TPM) at a 30% premium, only 2 days after we switched from Telstra (TLS). Also Vocus (VOC) that we’ve just purchased has rallied an impressive 9.5% for the week. Takeovers release funds back into the market and in this case, a large percentage of the $1.4bn is likely to be reinvested in stocks, with the Telco space receiving an initial strong lift on Friday.

Bullish: The ASX200 while over 5595(weekly), Challenger (CGF), Crown (CWN), European Indices (especially Spain), Chinese Index, Banks (medium term), Healthcare sector, Macquarie (MQG), Nikkei, REIT’s.

Neutral: ASX200 (daily), RIO, FTSE and Hang Seng.

Bearish: Copper, Crude Oil, IAG, Iron Ore, BHP (long term), Newcrest (NCM), US equities (short term), Seek (SEK) short term, Regis (RRL) and Woolworths (long term).

Summary:

• No significant change, I continue look for ideal areas to tweak my portfolio over the coming weeks / months as I believe the “yield chase” is becoming very mature. I am considering the below:

1. Sell part of my overweight (ex div.) CBA and switch into the healthcare sector if it weakens.
2. Potentially switch more of my bank exposure after historically strong performing April into cash, or a REIT e.g. WFD.
3. For traders – I can buy FMG calls / call spreads basis the stock around $1.80 and oil stocks into panic selling.

*Watch for alerts

What Matters this week

The ASX200 is looking to open 10 points lower on Monday after the Dow’s 0.82% fall on Friday night.


Potential Investing opportunities for the coming week

• I remain long the yield play, but will be looking to switch part of my holdings in coming weeks / months.
• Short term I prefer NAB over other banks for future dividend in May.

Potential Trading for the coming week

• I believe we will see a choppy retracement back towards the 5750 area for the ASX200, hence now buy weakness
• I can buy FMG calls / call spreads if the stock trades back towards $1.80.
I will look to go long the oil sector via options into panic selling which may occur next week.

 


 

Portfolio Holdings

My portfolio outperformed last week, the ASX200 fell 1.4% courtesy of our switch from Telstra into IINet and Vocus.

1. Challenger (CGF) +0.4% - medium term investment.
2. Commonwealth Bank (CBA) +0.3% - Long term investment.
3. National Australia Bank (NAB) -0.6% - Medium term investment.
4. Vocus (VOC) +9.5% - Medium term investment.

• Cash for future purchases, ~10%.

Australian ASX200

I am looking to spread my portfolio into more growth stocks in coming weeks/months.

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.

Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Dow Jones Index Daily Chart

Chart 10 – S&P500 Monthly Chart

Chart 11 – S&P500 Weekly 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 5% on 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 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.

Chart 23 – BHP (US) Monthly Chart

Chart 24 – BHP Weekly Chart

Chart 25 – Woodside (WPL) Daily 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 33 – ANZ Bank (ANZ) Monthly Chart

Chart 33b – ANZ Bank (ANZ) Daily 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 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 rally.

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 looking for a final low to this move prior I believe to a strong rally towards $US50/barrel.

Iron Ore is 50-50 here BUT the trend is 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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