Market Matters Report / The Hickman Report - Saturday 1st November 2014

By Market Matters 01 November 14

The Hickman Report - Saturday 1st November 2014

The Hickman Report - Saturday 1st November 2014

Overall Market Matters macro view 

Australian equities had another excellent week, with the ASX200 rallying 115 points (+2.1%), again aided by strength from world equities e.g. on Wall Street, the Dow rose 585 points (+3.5%), but the standout was Japan, where the Nikkei rallied 1,122 points (+7.3%), with almost 5% occurring on Friday after further stimulus was announced. The unexpected boost in stimulus by the Bank of Japan (BOJ) surprised the market just before 4pm on Friday; investors are hoping this stimulus plus more from Europe, will pick up the slack created by the US recently ending their Quantitative Easing (QE).

  •  The Bank of Japan raised its annual target for monetary expansion by over 14% plus importantly the Governments Pension Investment Fund said it will put half its holdings in local and foreign stocks, double previous levels, and invest in alternative assets.

Japan’s Public Pension Fund is $US1.2 trillion, a significant amount of money, under the fresh guidelines Japanese and foreign stocks will receive a 25% allocation up from 12% as Japanese bonds are sold. This is “Abeconomics” at its most aggressive, Prime Minister Shinzo Abe is attempting to make Japanese stocks more attractive and speed up the nation’s economic recovery – a big punt with retiree’s money. The 13% change to equity weightings equates to approx. $US117 billion dollars flowing into equities, short term clearly very positive. However, my take on this latest piece of artificial government stimulus is far from positive medium term:

  • I have been calling the US equities to fresh highs for the last 2 weeks; we are basically there now after the Japanese news on Friday. I believe US equities will rally approx. another 5% from current levels prior to a 14-15% correction.

In basic language, I think we are about to witness a “Gold Coast property style blow off” and subsequent big correction fuelled by Japanese money. I was struggling to see a catalyst that would create this blow off with the exception of the “Christmas Rally”, but now we have our answer.

Picking how far a market will rally into a top is fraught with danger, so we will keep our fingers on the pulse and watch for signs of failure over coming months. Points to note for targets as we rally:

  1. The main US Indices are targeting 5% higher, but the Russell 2000 is closer to 8%.
  2. There are no clear targets for the ASX200, but my GUT is now saying the 5750 area.
  3. European Indices are targeting +10% higher, perhaps yet more stimulus?
  4. We are approaching the top of the Investment cycle “Phase 3” see chart 4.

 

This week, there are fewer clear current technical charts but none are negative for equities:

Bullish: US & European equities will continue to make fresh highs, Bank of Queensland (BOQ) is bullish targeting $13.50 area and Seek (SEK) is targeting $19 area.

Bearish: Gold and related stocks are bearish, targeting a 10% fall minimum, the $A looks set for a sharp pullback towards 85c very soon.

My conclusions:

  • Equities are in the process of rallying to fresh 2014 highs for an excellent selling opportunity.
  • After a sharp 400-point rally the ASX200 is likely to correct / consolidate shortly, buy any 100 point correction.
  • If the $A drops sharply to the 85c area, it may coincide with a 100 point pullback in the ASX200 as banks may be sold.
  • Gold is targeting US$100-200/oz. lower; the low is likely to coincide with the high in equities and perhaps Newcrest around $6-6.50.

 

What Matters this week

The ASX200 is looking to open about 15 points higher on Monday, around 5540; I am 50-50 short term but a buyer of any 100 point pullback.


Potential Investing opportunities for the coming week

  •  I am a buyer of any 100 point pullback in the ASX200.
  • I will be a seller of local stocks when overseas indices hit my targets.

 Potential Trading for the coming week

  • I remain 50-50 short term but a strong buyer of any 100 point pullback. 

 

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

 

Portfolio Holdings

Last week my portfolio had a good week outperforming the ASX200 which rallied 2.1% with laggards SWM and MY really performing, at last!

  1. ANZ Bank (ANZ) +1.5%.
  2. Ansell (ANN) +1.7%.
  3. Bank of Queensland (BOQ) +1.0%.
  4. Challenger (CGF) +3.6%.
  5. Commonwealth Bank (CBA) +2.2%.
  6. Flight Centre (FLT) -0.3%.
  7. Insurance Australia Group (IAG) +6.5%.
  8. Myer Holdings (MYR) +8.4%.
  9. Seven West Media (SWM) +4.9%.

 *I am not that happy with Flight Centre (FLT) comments at its AGM and may scratch trades next week depending on price action.

  •  Cash, around ~5%.

 

Australian ASX200

I am again neutral the ASX200 for the week ahead but still positive overall into Christmas.


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 have not moved together:

  • The Russell 2000 targets are approx. 8% higher.
  • The NASDAQ has already broken out to fresh 2014 highs.
  • The Dow & S&P500 remain very bullish targeting 5% gains from current levels.

Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Dow Jones Index Daily Chart

Chart 10 – S&P 500 Monthly Chart

Chart 11 – S&P 500 Weekly Chart

Chart 12 – Russell 2000 Index Monthly Chart

Chart 13 – NASDAQ Weekly Chart

Chart 14 – The Stock Market Cycles

 

European Indices
I would still rather be long at current levels looking to add into any weakness.

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 but China remains firm. However, Japan is a run-away train and price action next week will be fascinating.

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 anticipate selling all / part in coming months.

I have still no interest in resource stocks.

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 – CBA Quarterly Chart

Chart 31 – ANZ Bank (ANZ) Monthly Chart

Chart 32 – Westpac Bank (WBC) Weekly Chart

Chart 33 – National Bank (NAB) Weekly Chart

Chart 34 – Macquarie Bank (MQG) Weekly Chart

Chart 35 – Bank of Queensland (BOQ) Weekly Chart

Chart 36 – AMP Weekly Chart

Chart 37 – Challenger Financial (CGF) Monthly Chart

Chart 38 – Suncorp Group (SUN) Monthly Chart

Chart 39 – Insurance Australia (IAG) Monthly Chart

Chart 40 – QBE Insurance Monthly Chart

Chart 41 – Wesfarmers Ltd (WES) Weekly Chart

Chart 42 – Woolworths Ltd (WOW) Monthly Chart

Chart 43 – Seek Ltd (SEK) Weekly Chart

Chart 44 – Real Estate Australia Group Ltd (REA) Monthly Chart

Chart 45 – Telstra (TLS) Monthly Chart

Chart 46– M2 Group Ltd (MTU) Monthly Chart

Chart 47 – Crown Resorts Ltd (CWN) Monthly Chart

Chart 48– Ansell Ltd (ANN) Monthly Chart

Chart 49– CSL Ltd (CSL) Monthly Chart

Chart 50 Ramsay Healthcare (RHC) Monthly Chart

Chart 51– Resmed (RMD) Weekly Chart

Chart 52 - Fairfax Media (FXJ) Monthly Chart

Chart 53 – Seven West Media (SWM) Monthly

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.




Commodities

Gold remains very weak and I believe it falls towards the US$1,100/oz 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.

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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