Market Matters Report / The Hickman Report - Saturday 22nd November 2014

By Market Matters 22 November 14

The Hickman Report - Saturday 22nd November 2014

The Hickman Report - Saturday 22nd November 2014

Overall Market Matters macro view

Last week, Australian equities had a simply awful week on all matrices, not just from Iron Ore stocks that captured most of the headlines. Below is a comparison of last week’s performance with a number of markets, including some that are heavily resources based:

  • ASX200 fell 2.8% while the Dow rallied 1%, UK FTSE 1.5% and the German DAX 5.2%.
  • The resource based Canadian S&P/TSE Index rallied 1.8% and Brazilian Ibo Vespa rallied 8.3%.
  • In Asia markets were mixed with China up 0.3%, Japans Nikkei down 0.8% and the Hang Seng down 2.7%.

While I watched the waves of selling hit our market last week, it felt like a number of large traders were simply selling Australia and allocating funds to other parts of the globe and the above numbers appear to support this “gut” feeling. Unfortunately, there have been a number of research reports pointing out “the luck country” is running out of money as China slows and the population ages. When we combine these reports with a 6.8% fall in Iron Ore prices over the week (63% fall over recent years} and downgrades to large local players like Woolworths (WOW), Orica (ORI) and Sonic Healthcare, pessimism driven selling accelerates and feeds on itself.

However, taking a deep breath, equities are still following the road map very closely that I have been forecasting over recent weeks, albeit with greater weakness domestically. Let’s again revisit exactly what I am targeting technical 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 257 points (4.64%) on Friday. Also, the Medibank float commences trading next week which should let the market return to normal.
  2. I still anticipate a classic Christmas rally into a major top; I now doubt whether the ASX200 can break much over 5600.
  3. I am then forecasting a 2000-2500 pullback in the Dow approx. 15% (Phase 4 on chart 14), creating another great buying opportunity. I am envisaging this pullback will take the ASX200 back towards the 5000-5100 level.

When I went home yesterday to take Harry to his swimming class, I was seriously doubting that the above could unfold, especially locally and I would have to seriously rethink what comes next for equities, but after I finished dinner and glanced at my Bloomberg, the below headlines turned all the lights back on!

  1. China cuts interest rates for the first time since 2012.
  2. European Central Bank President Mario Draghi says he will do whatever is necessary to raise inflation in Europe (helps Gold).

We now have Japan, Europe, China and the US to a lesser degree, doing everything in their powers to stimulate growth, inflation and hence equities. This now adds fundamental confirmation to my current technical bullish view on gold, targeting a $US200 rally from current levels.

The market’s reaction was very bullish to these two economic sledgehammer style events. The ASX200 is pointing to an opening on Monday of +50 points (0.9%) with BHP closing this morning in the US up $A1.37 (4.3%), following the US sector, where Materials Companies rose to a two-month high and Vale (US) the largest Iron Ore producer in the world rallied 8.3%.

  • I am now positive BHP (US) on a short term basis, for the first time in months, targeting rally to over $A34.
  • Twiggy Forrest purchasing another 11million Fortescue (FMG) shares last week should help support the battered stock.

 

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

Bullish: US Indices should trade another 3-4% higher, European Indices are very bullish targeting fresh 2014 highs, The Gold Sector looks very bullish, BHP is +ve short term targeting over $34, Seek remains bullish targeting $19.

Neutral: The ASX200 is not bullish on a short term basis until a break of 5430.

Bearish: The US Indices are heading for a 15% correction in coming months; I remain bearish Woolworth’s long term targeting under $25.

My conclusions:

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

 

What Matters this week

The ASX200 is looking to open up 50 points on Monday, around 5350; I am now positive short term and a buyer of any 20-30 pullbacks..


Potential Investing opportunities for the coming week

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

Potential Trading for the coming week

  • I am bullish short term but favorite 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 2.8%, with Regis staring and Challenger price action remaining a concern.

  1. Bank of Queensland (BOQ) -1.5% - Medium term investment.
  2. Challenger (CGF) -2.7% - Medium term investment.
  3. Commonwealth Bank (CBA) -2.1% - Long term investment.
  4. Insurance Australia Group (IAG) -2.3% - Medium term investment.
  5. Regis Resources (RRL) +9.3% - short term trade / investment.
  • Cash, around ~10%.

Australian ASX200

I am positive the ASX200 for the week ahead, and overall into Christmas, while expecting further choppy action, 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 bullish targeting fresh 2014 highs..

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.

Chart 23 – BHP (US) Monthly 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) 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 – 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 finished its fall from 95 I am now targeting a rally to 89c minimum.

 

Commodities 

Gold rallied very well last week, I remain bullish. 

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 but a bounce is due. 

Iron Ore is showing no signs of a bottom.

Chart 61 – Gold Monthly 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

Shawn Hickman has managed money for some of the Australia’s elite and super rich. He now shares his market insights daily via Market Matters. If you are not currently subscribed to Market Matters newsletter, you can sign up for free now.

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