Market Matters Report / The Hickman Report - Saturday 17th January 2015

By Market Matters 17 January 15

The Hickman Report - Saturday 17th January 2015

The Hickman Report - Saturday 17th January 2015

 

The volatility in markets last week went almost out of control when the Swiss surprised everyone by ending their Foreign Exchange intervention, sending their currency up almost 40% against the Euro, the Swiss share market down 15% and a number of large FX players counting their losses e.g. Barclays estimate $100m and Citi $150m – I would be amazed if there are not more massive losses out there being clarified prior to being revealed.

 

What happened in simple terms?

1. Mario Draghi decided to print lots, & lots, of Euros to devalue their currency and subsequently make Europe competitive and hence stimulate their economy.
2. The Swiss National Bank took a decision three years ago to stop the appreciation of the Swiss Franc (which was killing their economy) by defending the Euro against the Franc (buying Euros and selling Swiss Francs).
3. Mario Draghi has continued to print yet more Euros and is expected to announce even greater levels next week- it’s not working by the way!
4. The Swiss decided this is becoming way too expensive/ dangerous; hence, let’s go back to a free market – at least for the Swiss currency.

 

The Swiss economy has now got an enormous battle on its hands to avoid a recession due to an overvalued currency, hence the stock market fall.
This is what happens when markets move back to fair value and intervention is removed, it gets ugly fast.

 

What does this all mean in terms of investing in Australian equities for 2015?

 

We still have enormous Central Bank intervention from the Americans (Fed), Europeans (ECB), Japan (Abenomics) plus the Chinese are now getting on the bandwagon.

 

All of the above intervention is supportive of equities as it basically provides free money sending professional investors out searching for higher returns from investments like equities. At times like this when volatility is clearly on the rise, investors MUST not fall into the 6 deadly sins of investing:

 

1. Not having an Entry Plan – Technical levels, fundamental valuation, sector strength, position size and “fit” within your portfolio.
2. Not having an Exit Plan – including profit, loss, scale in and scale out.
3. Review your Portfolio on a sensible time frame, paying special attention to the reason for the position – has it gone?
4. Personalizing Losses – we all make mistakes.
5. Personalizing Successes – past performance is no guarantee of future success.
6. Placing more emphasis on being right than making money.

 

As you all know, I am short term negative equities looking for a 10% correction in US equities from current levels, hence we are sitting at point 1 of the above stages until further notice. Unfortunately this view is “fighting the Fed”, the Fed plus other Central banks are able to buy the S&P500 Futures until the end of 2015. The CME actually charges Central Banks 34% less fees than ordinary customers!

 

• In Australia we are obsessed by property, but in the US, equities play a far more important role, hence it’s in the interest of the Fed not to let stocks fall too far just like the RBA would hate a massive downturn in property locally when we are flirting with a recession.

 

The good news is if we get the 10% correction from here in US equities the Fed may be buying with us!

 

This week the clear technical charts are again aligned with above comments:

 

Bullish: The Chinese Index looks set for more gains, Gold and its respective Sector still looks bullish, BHP looks set for a bounced towards $30, ResMed, Seek remains bullish targeting $19 and Telco’s.

 

Neutral: ASX200 (daily basis), RIO, Australian Banks.

 

Bearish: The US Indices are heading for a major correction in coming months, I remain bearish BHP longer term, Australian Insurance Sector and Woolworths sub $25.

 

My conclusions:

• Cash is “king” investors sit back and be patient but be prepared for lots of volatility in coming weeks / months.
• I intend to focus my buying in the Telco’s, Banks and Healthcare but other stocks are likely to provide opportunities if they get oversold.
• Gold should continue to rally towards $1400/oz. and stocks in the sector, especially Australian based companies should follow with the added tailwind of a weak $A.

 

What Matters this week

The ASX200 is looking to open down up around 55 points on Monday, around 5355.


Potential Investing opportunities for the coming week

 

• For investors holding cash, be patient it may take 3-4 months but I anticipate excellent buying opportunities in 2015.

 

Potential Trading for the coming week

 

• I am unsure on the index short term and would await developments.
• I can buy BHP for a bounce towards $30 potentially hedging with Woodside (WPL) or the XJO.

 


 

Portfolio Holdings

My portfolio has been reduced significantly over December as was discussed in previous reports. We outperformed slightly as the ASX200 fell 3%.

1. Bank of Queensland (BOQ) -2.6% - Medium term investment.
2. Commonwealth Bank (CBA) -2.9% - Long term investment.

 

• Cash, ~50%.


Australian ASX200

I intend to be patient with any buying at present.

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 will ideally correct 10-15% over coming months.

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

My “Gut Feel” tells me that European Indices will spike under October lows in coming months.

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 is still looking very bullish as it opens its market to offshore investors.

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 to be over 50% in cash awaiting developments.

Chart 23 – BHP (US) Monthly Chart

Chart 24 – BHP Daily Chart

Chart 25 – Woodside (WPL) Monthly Chart

Chart 26 – RIO Tinto (RIO) Weekly Chart

Chart 27 – Fortescue Metals (FMG) Monthly 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) Quarterely 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)

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– 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 looks ready to consolidate between 80c and 83c.

 

Commodities

I remain bullish Gold targeting the $US1400 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.

Crude Oil remains negative at present but a bounce / consolidation is now overdue.

Iron Ore is showing signs of a bottom as downside momentum is falling, interestingly some short covering is emerged in the related stocks.

Chart 60 – Gold Monthly Chart

Chart 61 – Gold (in $A) Quarterly Chart

Chart 62 – Copper Weekly Chart

Chart 63 – Crude Oil Monthly Chart

Chart 64 – 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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