Market Matters Report / The Hickman Report - Saturday 15th November 2014

By Market Matters 15 November 14

The Hickman Report - Saturday 15th November 2014

The Hickman Report - Saturday 15th November 2014

Overall Market Matters macro view

Australian equities had a relatively poor week , the ASX200 fell 95 points (-1.7%), while the Dow rose 61 points (0.3%). The underperformance was primarily due to the persistently weak resources sector and Westpac (WBC) trading ex-dividend. Over coming weeks, I would not be surprised to see some “mean reversion” as the resources bounce, led by the gold sector, which I am now very bullish.

Equities are still following the road map very closely that I have been forecasting over recent weeks.

Let’s again revisit exactly what I am targeting over coming months and where we are in the cycle so hopefully we can all trade / invest successfully:

  1. The Short term mid-November pullback may be complete for the ASX200, after we corrected 131 points (2.4%) into Friday morning.
  2. I now anticipate a classic Christmas rally into a major top. I am 50-50 whether the ASX200 can break much over 5600.
  3. I am then forecasting a 2000-2500 pullback in the Dow, approximately 15% (Phase 4 on chart 14). I am envisaging this pullback will take the ASX200 back towards the 5000-5100 level.

I reiterate that tops are extremely hard to pin point, but the only sector that I would currently buy is gold, plus I am looking to lighten my other holdings into a “Christmas rally”. Historically, the seasonality is now very positive into Christmas, BUT a 90% rally in the S&P500 since October 2011, without a 10% retracement I believe, should restrain people from getting too greedy this year. The S&P500 is now trading on 17x projected earnings, the highest level since December 2009. Simply put, the market is pricing in perfection on all fronts thanks to world stimulus / low interest rates, however we recently saw in September / October how quickly the market can change from this complacency when it fell 9.8% in 5 weeks.

As you have now gathered, think gold will rally at least $200/oz. (almost 20%) from current levels this may coincide with weakness in equities. On Friday night, the market was very kind to us after we bought Regis Resources (RRL) on Friday, with the precious metal rallying 2.3%. The rally led to Barrick Gold (ABX.US) in the US, gaining almost 7% in one session (chart 31), I am also very positive this US Gold company from current levels.

This week, there are less clear current technical charts but the quality is improving:

Bullish: The $A is short term positive target 89c, The ASX200 should rally towards 5600 in coming weeks, US Indices should trade another 3-4% higher, CBA looks set for a new all-time high, The Gold Sector looks very bullish, Seek is bullish targeting $19.

Neutral: RIO remains neutral.

Bearish: The US Indices are heading for a 15% correction in coming months.

My conclusions:

  • Equities are in the process of making a significant top into Christmas, early 2015 and Gold is about to rally hard.

What Matters this week

The ASX200 is looking to open up 10 points on Monday, around 5465. I am now positive short term and a buyer of any 20-30 pullbacks..


Potential Investing opportunities for the coming week

  • I am a “drip feed” seller of local stocks into strength with overseas indices being within 3-4% of my targets and trading at all-time highs.
  • I am a buyer of gold stocks - I prefer Regis Resources (RRL) and Barrick (ABX) over Newcrest (NCM).

Potential Trading for the coming week

  • I am bullish short term, but favourite trade is to buy gold exposure, similar to my investing view. 

 

  • Watch for specific ideas in morning reports and Alerts when I transact and stocks hit our levels.


Portfolio Holdings

My portfolio had another good week outperforming the ASX200 which fell 1.7%, and importantly changed shape significantly as we “threw out the rubbish” – CGF is my only concern at present.

1. Bank of Queensland (BOQ) +0.4% - Medium term investment.
2. Challenger (CGF) -4.8% - Medium term investment.
3. Commonwealth Bank (CBA) -1.2% - Long term investment.
4. Insurance Australia Group (IAG) -0.2% - Medium term investment.
5. Regis Resources (RRL) +9.0% - short term trade / investment.

*I sold SWM and MYR during the week.

• Cash, around ~10%.

Australian ASX200

I am positive the ASX200 for the week ahead while expecting some choppy action, plus still positive overall into Christmas before I expect switching to very negative.


Australian ASX200

I am again neutral the ASX200 for the week ahead but still positive overall into Christmas before I expect switching to very negative.

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 – Volatility Index VIX Weekly Chart

Chart 6 – The US 10 year Interest Rate Monthly Chart

Chart 7 – New Zealand 50 Index Monthly Chart


American Equities

The American indices are approaching my targets fast with the Dow and S&P500 only 3-4% away.

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 Stock Market Cycles

 

European Indices
I am now neutral after recent underperformance.

Chart 15 – Euro Stoxx 50 Weekly Chart

Chart 16 – FTSE Weekly Chart

Chart 17 – Spanish IBEX Monthly Chart

Chart 18 – Spanish IBEX Weekly Chart

Chart 19 – German DAX Monthly Chart

 

Asian Indices

Asian indices are neutral at present. However, Japan has been extremely strong courtesy of stimulus announcements, I would be a seller of this surge.

Chart 20 – Hang Seng Weekly Chart 

Chart 21 – China Shanghai Composite Monthly Chart

Chart 22 – Japanese Nikkei 225 Monthly Chart


Australian Stocks
I am happy with our portfolio above but still anticipate selling all / part in coming months. Plus I am watching gold stocks closely.

Chart 23 – BHP Daily Chart 

Chart 24 – Santos (STO) Weekly Chart

Chart 25 – Woodside (WPL) Monthly 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 34 – Westpac Bank (WBC) Weekly 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) Monthly Chart

Chart 45 – Seek Ltd (SEK) Weekly Chart

Chart 46 – Telstra (TLS) Monthly Chart

Chart 47– M2 Group Ltd (MTU) Monthly Chart

Chart 48 – Crown Resorts Ltd (CWN) Monthly Chart

Chart 49– Ansell Ltd (ANN) 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 - Flight Centre (FLT) Monthly

Chart 55 – Coca-Cola Amatil (CCL) Weekly

Chart 56 - Australian Retail Index Monthly

Chart 57– Myer Holdings (MYR) Weekly

Chart 58– JB Hifi (JBH) Monthly

Chart 59– Harvey Norman (HVN) Monthly

Chart 60– Australian Dollar (AUD) Weekly Chart

The $A looks to have “cracked” and technically I am ultimately targeting the 81c area but a break back over 87c will be positive.


Commodities

Gold rallied very well on Friday, I now have my buy triggers.

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 mildly negative at present.

Chart 61 – Gold Monthly Chart

Chart 62 – Copper Weekly Chart

Chart 63 – Crude Oil 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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