Market Matters Report / The Hickman Report - Saturday 23rd November 2013

By Market Matters 23 November 13

The Hickman Report - Saturday 23rd November 2013

Last week’s poor relative performance by the ASX200

The Overall Market

  • The longer term charts (monthly) remain very bullish likely into 2016, however, we have probably witnessed the more aggressive part of the move with the potential exception of the NASDAQ. 
  • Interestingly we may be close to a decent pullback on the journey with Dow looking vulnerable to an 8% correction.
  • This would only be back to November lows, hardly a major cause for concern.
  • I stress if we get this retracement, it’s an excellent buying opportunity and not time to panic sell.
  • This overall bullish view is very easy to comprehend with Janet Yellen taking over at the Fed saying that inflation is very much a second concern to improving healthy employment.
  • The market looks set to remain very happy with Janet Yellen’s policies. 
  • Plus the US GDP figures look solid for a few years to come and rate hikes unlikely until 2016 (seven years of zero rates).


What Mattered Last Week

Last week was disappointing for ASX200 falling 120 points into Thursday’s close, before bouncing 48 points on Friday. Conversely the Dow added another 102 points, again to all-time highs, ignoring risks of a Fed Taper in the first quarter of 2014 and focusing on previous comments from Janet Yellen and relative positive economic fundamentals.

  • Last week’s poor relative performance by the ASX200 was influenced by over $3 billion of IPO’s in the near future.
  • I would expect that the vast majority of cash required for these has been raised.
  • Last week was another great example that stock selection is vital for the coming year with this week WOR -26.4% and NCM -11.5% compared to BOQ +3.1%, BXB +4% and QBE +2.8%.
  • Gold stocks had a poor week as expected, headed by NCM breaking under $9 as expected. Fresh lows since August 2003 since when Gold has rallied more than 300% - not a great performance. I am a buyer of this sector into weakness.
  • Janet Yellen is very unlikely to say anything to hurt equities in the short term, it would be counterproductive to the Feds objectives but US politicians play by their own rules and can often create short term volatility.
  • The Fed minutes that came out on Wednesday evening implied Fed Tapering in coming months hitting the Dow 150 points in one hour, this fall was eradicated very quickly over coming days.
  • Investors remain focused on US. Economic expansion and poured another $548 million into Mutual Funds that invest in shares.


What Matters This Week

  • With IPO cash raising likely complete, the ASX200 can be driven up by strong seasonality and specific stock news.
  • Traders / investors should be aware that December is historically the number one month for the S&P 500.
  • As we witnessed on Friday a simple lack of selling can be explosive on the upside.
  • In mid-December shareholders will receive $8.6 billion in dividends, explaining why the ASX200 has rallied 85% of time from this period into January (some of this will be absorbed by the IPO’s).
  • November began historically the best 3 months for the US markets and Australia usually kicks hard from this exact time.
  • I remain a seller of banks into any fresh highs for the ASX200, investors may need to consider options strategies depending on individual tax positions e.g. large capital gains on bank shares.
  • This selling opportunity could well be around 5500 / 5600 for the ASX200, in early December / January.
  • However, I am not complacently bullish due to the technical picture evolving targeting a decent correction fairly soon.
  • A break of 5280 for the ASX200 will turn me medium term bearish.


Trading for the coming Week

  • Overall the ASX200 remains clearly bullish, while over 5280, and I believe will make new highs for 2013.
  • Monday is going to be very interesting, the “abc up” in the SPI implies acceleration while the 5360 area holds basis the Dec contract.
  • I remain net positive the domestic market while we remain over 5280 for the ASX200, looking to sell fresh new highs.
  • I am looking to increase long exposure to QBE any buying close to $15.50 is good risk reward.
  • I am a buyer of FMG around $5-5.20 but this is unlikely to occur this week.
  • I am looking to increase holdings of OGC into gold sector weakness – copper is a slight concern here.
  • The gold sector has had an awful year and a short covering rally into Christmas is a strong possibility plus a seasonally common occurrence.
  • In the medium term I am still looking for an 8% pullback in the US for an excellent buying opportunity, a break under 15,700 in the Dow would trigger signals that this move has commenced.
  • Investors should have plans for this potential eventuality if it occurs. I have increased cash holdings and will simply buy my preferred equities into weakness.


Market Matters’ View

The below views are illustrated in detail by the charts beneath.

Bullish: Australian Banks (w), ASX200 (d), BEN (m), BOQ (m), CBA (m), CSL (m), Dow (m), FOX (m), FMG (w),FTSE (w), Hang Seng (w), IBEX (m), NASDAQ (m), Nikkei (m), OGC (m), QBE (m), S&P (m), SUN (m), WES (w) & WOW (m).

Neutral: AMP (w), BHP (w), NCM (m), NZ (w), RIO (w), SEK (w) & STOXX (w).

Bearish: China (m), Copper (m) & Gold (m).

  • 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 bullish on a monthly basis, plus we are in a seasonal very bullish phase. Most people were too afraid to buy closer to 5000 because of media coverage surrounding the US debt default situation – now fear of missing out is emerging, and 5500+ is quickly coming into view. Currently every retracement soon reaches hungry buyers. The yearly range targets 5450+ and a simple monthly abc targets 5670. However, I am very wary of the potential 8% correction for overseas markets and the weekly “rising wedge triple top” formation on the weekly chart.








 

American Equities

The American indices look set to rally into December with the Dow targeting well over 16,000.








 

European Indices

The European indices now look net bullish for 2013 with the FTSE starting to look very promising, I would be an aggressive buyer with a stop under 6275. The Spanish IBEX has reached my long term target plus the short term pattern targets a 10% rally minimum.





Asian Indices

Asian indices remain positive but have been underperforming. The Nikkei has been trading out of control, under the weight of stimulus and intervention.





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 – my view is that the next move in rates is up. Overall the major stocks in the ASX200 remain clearly positive; however, I am reducing exposure into current strength positioning myself for a potential pullback.

Stock picking remains at a premium as is demonstrated in 2013 by BOQ outperforming in the Banks and FMG in the resources space.























Australian Dollar

The $A is looking very heavy, the recent bounce was a little greater than anticipated breaking 97c, renewed weakness now looks likely with an ultimate target of 81-82c.



Commodities

The Gold chart looks bullish longer term targeting fresh recent highs, likely over $2,000 suggesting inflation - confirmation requires a close over 1480. On a monthly basis, gold remains bearish targeting new lows for 2013/14 under 1180. Seasonally this is a good period for gold.

Also, the amount of money tied up in Gold ETF’s that did not exist pre 2004 remains. Having recently visited China, the only two investments that interest locals are property and gold……not reflected by the price yet.

Copper remains negative on a longer term basis, a very similar chart pattern to Newcrest Mining and we all saw what happened there – PNA & OZL again had poor weeks.




Please note this is my personal TECHNICAL opinion of markets and "General Advice" taking no account of individual’s circumstances.

 

 

 

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