Market Matters Report / The Hickman Report - Saturday 21st June 2014

By Market Matters 21 June 14

The Hickman Report - Saturday 21st June 2014

The Hickman Report - Saturday 21st June 2014

 


Market Matters Summary for Saturday 21st June 2014

  • The ASX200 closed up just 14 points (0.31%) last week failing to follow the Dow which was up 172 points (1%). We had positive comments on interest rates from the Fed, but Shell’s Woodside stake hitting the market was a negative.
  • Unfortunately we have experienced a very boring 18 weeks with the ASX200 trading in an extremely tight range between 5555 and 5289, I remain negative equities from these levels but it’s taking time to see if I am correct. 
  • The Australian Index remains supported by the high yielding financial stocks who are reveling in the current “free money” environment. Banks appear to be raising wholesale 3-5 year term debt at around 3.0%-3.1% which is around, or cheaper, than term deposits (see table below). If wholesale rates stay where they are, we suspect it will be hard to get 3-4 month term deposits above 3% in 3-6 months’ time. 
  • Hence money is still flowing out of retail investor’s term deposits as they mature into bank shares. This is slowly scarring me as retail investors often end up on the wrong end of large Macro changes in trend.
  • Last week we again saw fresh 2104 highs from the US NASDAQ & German DAX but I remain confident in my prediction of a 10% correction from these indices in coming months which is very likely to flow into the ASX200. As mentioned in Friday’s morning report, the Russell 2000 will ideally make a fresh 2014 high first – 2.1% higher.
  • I repeat yet again tops are extremely hard to pick as markets like to go up and they often take a few attempts to fail. I am comfortably +55% in cash looking to buy a correction, please note I am still net bullish for the next year, or two and am only calling a 10% correction in offshore markets, back to March 2014 lows. 

 

What Mattered Last Week

Last week was choppy for the ASX200 as funds were raised earlier in the week to pay for the $A3.2 billion of Woodside (WPL) shares that Shell sold to institutions. It feels strange that the market only finished up 14 points after experiencing a +85 point day on Thursday and on Friday a -49 point day; it feels like volatility is about increase. Gold had a very strong week that may indicate we are about to have a sharp pushup towards 1400, I will watch Gold stocks closely this week.

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

Positive Performance – Ansell (ANN) +3.6%, Echo (EGP) +11.2%, Fortescue (FMG) +3.9%, Flight Centre (FLT) +3.4% & Newcrest (NCM) +9.4%.

Negative Performance – Alumina (AWC) -1.8%, Crown (CWN) -1.9%, CSL -0.9%, Telstra -0.8%, Wesfarmers (WES) -1.3%, Woodside (WPL) -3.3% & Woolworths (WOW) -3%.

  1. I remain approx. 55% in cash, with equal weighting in Suncorp (SUN), M2 Group (MTU) & OZ Minerals (OZL). If I am wrong and we have no correction, I simply make a small amount of interest and can relax and look to reinvest in coming months. As I am very “cashed up” looking to buy weakness, I am giving my current 3 positions a little more room than usual with regards to stops.
  2. Patience is close to paying off with a few stocks extremely close to my buy levels.

What Matters this week

  • No major change in that I am looking for a decent correction very soon in equities, ideally we will see the Russell 2000 (small caps Index) make fresh 2014 highs followed by reversals in all major equity indices.
  • I remain bullish going forward for the next year, or two, hence if we do get my predicted correction I will become an aggressive buyer.
  • We are approaching the “end of financial year” where Tax selling is often witnessed creating bargains. Watch for ideas on this over coming two weeks in the morning reports.


  • 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 . Any questions please do not hesitate to contact us.

Potential Investing opportunities for the coming week

  • Take profit on Suncorp over $14, especially if ASX200 is close to 5550 and the NASDAQ 3800.
  • I remain a buyer of Seek (SEK) between $15-15.50 with stops under $13.50.
  • I remain a buyer of Fairfax (FXJ) under 90c.
  • I remain a buyer of Ramsay Healthcare (RHC) around $41.50 with stops under $37.
  • I remain a buyer of Flight Centre (FLT) around $39-43.
  • Gold lovers can buy Newcrest (NCM) at 10.80 targeting close to $15 with stops at $10.20 – good risk / reward.
  • Watch for specific ideas in morning reports and Alerts when I transact.

Potential Trading for the coming week

  • I am comfortable being ½ short the ASX200 on a close under 5400.
  • I would use a close on the NASDAQ under 3700, &/or the DAX under 9750, as a trigger to add to this position.
  • I still like the “pair’s trade” / switch BUY Woodside (WPL) and sell RIO.
  • I still like the “pair’s trade” / switch of Sell Wesfarmers and buy Suncorp on relative value.


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, 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), SUN (m), Vocus (w) & WPL (m).

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

Bearish: Banks (w), BOQ (w), BHP (w) and (m), China (m), Copper (m), Dax (w), Gold (w), Magellan (MFG) (w), NASDAQ (w), QBE (w), RIO (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 but I still anticipate a decent correction from June – July.

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 3800 region that should commence very soon, ideally the Russell 2000 will see a fresh 2014 high first, approximately 2.1% higher.

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 – NASDAQ Monthly Chart 

Chart 14 – NASDAQ Weekly Chart 


European Indices

The DAX now looks very vulnerable and similar to the 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 the backbone of the ASX200.

  • Bank of Queensland is likely to be my preferred banks at some stage in the coming year.
  • I have no interest in “picking the bottom” of the Iron Ore space at present.

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 Flight Centre (FLT) Monthly 

Chart 56– Australian Dollar (AUD) Weekly Chart

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


Commodities

Gold rallied strongly last week moving me to 50-50 scenario that it may abc up towards 1,400.

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 pricing this area to hold.

Chart 57 – Gold Monthly Chart

Chart 57 – Copper Weekly Chart 

Chart 58 – 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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