Market Matters Report / The Hickman Report - Saturday 19th July 2014

By Market Matters 19 July 14

The Hickman Report - Saturday 19th July 2014

The Hickman Report - Saturday 19th July 2014

 


Market Matters Summary for Saturday 19th July 2014

  • The ASX200 closed up 45 points (0.8%) last week, following markets in the US, where the Dow was up 156 points (0.9%). Noticeably markets have now ignored a major debt issue in Portugal, significant increases in Russia / Ukraine tensions plus an invasion by Israel Gaza. Clearly a resilient / strong market.
  • Last week the sideways action ASX200 was slightly broken (by 6 points) only for the market to correct 77 points.
  • We clearly remain in a “stock pickers” market with very low interest rates and a significantly improving US economy the big supporting factors. Australia’s economy unfortunately continues to “splutter” along.
  • Friday was the second successive very strong end to a week, rallying 44 points from the morning lows, similar but not as aggressive to the previous week’s 76 point rally. A clear demonstration of buyers still circling any weakness.
  • So while I believe both fundamentally (valuations) and technically equities are due an 8-10% correction we cannot “fight the tape”, hence I remain in one of my quietest periods in the market for years as the ASX200 treads water.
  • The two markets I remain the most bearish have been falling for the last few weeks, the German DAX (-3.3%) and the US Russell 2000 (-5.1%), small cap Index, by far the hardest thing to predict is any correlation with the domestic ASX200. However, if the DAX falls another 8% it’s unlikely the local market will advance short term.
  • When I have witnessed similar periods before we either suddenly fall on relatively minor news (straw that broke the camel’s back) or we pop higher as buyers at lower levels become impatient and start chasing / paying up.
  •  I also reiterate again that I will be an aggressive buyer of equities if a decent correction eventuates. 

 

What Mattered Last Week

Last week was yet again very choppy for the ASX200 on a daily basis with a clear upward bias after Friday’s 44 point recovery.

On the performance front, the below stocks caught my eye over the last 5 trading days:

  • Positive Performance – BHP +2.2%, Challenger Fin. (CGF) +2.7%, Fortescue (FMG) +5.8%, Iluka (ILU) +6.9%, Newcrest (NCM) +2.9%, REA Group (REA) +4.4% and Woodside (WPL) +1.8%.
  • Negative Performance – AMP (AMP) -2.2%, Crown (CWN) -12%, Resmed (RMD) -1.3% and Seek (SEK) -1%.
  1. I am holding ~40% in cash, with equal weighting in Ansell (ANN), M2 Group (MTU), & Seven West Media (SWM). Also note from my positions I am net negative the overall index via XJO options.
  2. A few stocks continue to “twitch” my radar for buying/ accumulation into weakness.

What Matters this week

  • Technically I remain neutral at present but remaining wary of an 8-10% retracement in the US that would enable me to buy aggressively a market I am bullish for next few years. A close under 5480 in the ASX200 would switch me negative the local market short term.
  • Please note most trading and investing opportunities happen in under 5% of the time, in other words 3 weeks of the year, so patience / planning is vital. However, in the current choppy market I am likely to be more “stock specific active” than over recent years. Any questions please do not hesitate to contact us.
  • Watch for specific ideas in morning reports and Alerts when I transact.

Potential Investing opportunities for the coming week

  • My stops on Ansell (ANN) remain under $18.50, M2 Communications (MTU) remains below $5.70 & Seven West Media (SWM) under $1.84.
  • I can buy Seek (SEK) around $15.50 with stops under $13.50.
  • I can buy Bank of Queensland (BOQ) around $11.30 with stops under $10.50.
  • I can buy Fairfax (FXJ) under 85c with stops under 67c.
  • I can buy Flight Centre (FLT) around $41- 42 with stops initially under $38.
  • I can buy Resmed (RMD) around $4.40 with stops under $4.
  • Gold lovers can buy Newcrest (NCM) around $11.20 targeting close to $15 with stops at $10.50 – good risk / reward.

Potential Trading for the coming week

  • After Friday’s surprising strength in the domestic market I want to again sit on the sidelines for a few days but will become a seller if the ASX200 closes under 5480. 

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 any weakness:

  • AWC, CSE, CSS, FXJ, KCN, KDL, LEI, & PEN. – 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), CBA (m), CSL (m), Dow (m), Fairfax (m), IBEX (m), MTU (m), NASDAQ (m), Nikkei (m), OZL (m), RMD (w), SEK (m), S&P (m), SWM (m) & Vocus (w).

Neutral: AMP (w), ASX200 (d), Australian Banks (d) & (m), CWN (m), FMG (w), FTSE (w), Gold (w), Hang Seng (w), IBEX (w), Magellan (MFG) (w), NCM (m), NZ (m), REA (m), Retail Index (w), RIO (w), S&P (w), STOXX (w), SUN (w), TLS (m), WOW (m) & WPL (m).

Bearish: BOQ (d), BHP (m), China (m), Copper (m), Dax (w), NASDAQ (w), NZ (w), QBE (w) & WES (w).

  • 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 remain mildly bullish on a longer term basis, I will aggressively buy any decent pullback.

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 – The US 10 year Interest Rate Monthly Chart 

Chart 8 – New Zealand 50 Index Monthly Chart 


American Equities

The American indices reached my sell levels in early March, the NASDAQ then proceeded to fall 8.7%. I now expect another 8-10% fall from the 3900 region that should commence soon, the Russell 2000 reached fresh 2014 highs recently and has already started falling (-5.1%).

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 – Russell 2000 Index Monthly Chart 

Chart 14 – NASDAQ Weekly Chart 


European Indices

The DAX now looks very vulnerable and similar to the Russell 2000 / NASDAQ, with failure into current fresh highs my expectation.

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 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 +18% 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. There is clearly no sign of this at present as financial stocks remain strong and the Reserve Bank recently confirmed lower interest rates are here for a while.

Chart 23 – BHP Weekly Chart 

Chart 24 – BHP Daily 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 - OZ Minerals (OZL) 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 – Macquarie Bank (MQG) Weekly Chart 

Chart 36 – Bank of Queensland (BOQ) Weekly Chart 

Chart 37 – AMP Weekly Chart 

Chart 38 – Suncorp Group (SUN) Monthly 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) Weekly Chart 

Chart 45 – Real Estate Australia Group Ltd (REA) Monthly Chart 

Chart 46 – Vocus Communications (VOC) Weekly Chart 

Chart 47 – Telstra (TLS) Monthly Chart 

Chart 48– M2 Group Ltd (MTU) Monthly Chart 

Chart 49 – Crown Resorts Ltd (CWN) Monthly Chart 

Chart 50– Ansell Ltd (ANN) Monthly Chart 

Chart 51– CSL Ltd (CSL) Monthly Chart 

Chart 52 Ramsay Healthcare (RHC) Monthly Chart 

Chart 53– Resmed (RMD) Weekly Chart 

Chart 54 Fairfax Media (FXJ) Monthly Chart 

Chart 55 – Seven West Media (SWM) Monthly 

Chart 56 Flight Centre (FLT) Monthly 

Chart 57– Australian Dollar (AUD) Weekly Chart

The $A is looking choppy and is currently holding after a good bounce, with the potential to challenge the 97c area.


Commodities

Gold rallied strongly recently moving me to 50-50 scenario that it may abc up towards 1400.

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.

Iron Ore is plumbing 5 year lows but related stocks are definitely pricing this area to hold.

Chart 58 – Gold Monthly Chart

Chart 59 – Copper Weekly Chart

Chart 60 – Iron Ore Monthly

 

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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