Market Matters Report / The Hickman Report Saturday 25 October 2014

By Market Matters 25 October 14

The Hickman Report Saturday 25 October 2014

The Hickman Report Saturday 25 October 2014

Overall Market Matters macro view

Australian equities had an excellent week with the ASX200 rallying 141 points (2.7%), aided by strength from world equities e.g. on Wall Street, the Dow rose 425 points (2.6%). My views on the market are very clear and defined at present, so please excuse any repetition, but as we witnessed during the recent correction in equities, if investors do not have a clear plan, then excellent opportunities are missed.

My view for equities over coming months:

  • US equities and the German DAX will make fresh 2014 highs; my best guess is around 7% above the close on Friday.
  • The ASX200 as an index is harder to currently predict due to diverse sector performance, a failure to make fresh highs over 5680 would not surprise.
  • I remain bearish the large Iron Ore producers, targeting fresh recent lows e.g. 5-6% more weakness in BHP, but a sharp counter trend rally feels close at hand.
  • Local stocks going ex-dividend in November e.g. ANZ & NAB will be very well supported as the threat of interest rate rises fades fast.
  • After world equities make fresh highs, I am targeting an aggressive 15% correction, in other words we have just had a warning signal.

As covered recently, I have been looking for a decent low in mid/late October for run up into December, I now feel equities have had experienced their bottom:

  1. Since 1980, the October/November/December period on the S&P500 has a median gain of nearly 5.3% (7.8% since 2001).

This week the clear current technical charts are mainly overseas indices:

Bullish: US & most European equities will make fresh highs, Australian Banks look set for a strong November, Seek (SEK) is targeting $19 area.

Bearish: Iron Ore stocks should still see fresh annual lows, Gold and related stocks are bearish, targeting a 10% fall minimum, the $A looks set for a sharp pullback towards 85c soon.

My conclusions:

  • The recent correction is complete for major indices I consider.
  • I am not convinced we will rally back over the 5680 August high and we may again underperform overseas indices.
  • After a sharp 300-point rally, the ASX200 is likely to correct / consolidate shortly.
  • If the $A drops sharply to the 85c area it may coincide with a 100 point pullback in the ASX200.

What Matters this week

The ASX200 is looking to open about 20 points higher on Monday, around 5425; I anticipate this gap opening will fade over coming days but I am a buyer of any weakness.


Potential Investing opportunities for the coming week

  • I am a buyer ANZ / BOQ and Westpac into any weakness looking to keep November dividends.
  • I remain a buyer of Seek (SEK) around $16 with stops under $15.
  • I remain a buyer of Flight Centre (FLT) in the $40-42 are with an initial target of the $48 area.

Potential Trading for the coming week

  • I am 50-50 short term but a strong buyer of any 50-100 point pullbacks.
  • Traders can buy Fortescue (FMG) under $3 looking for another 10% bounce minimum.

 


  • Watch for specific ideas in morning reports and Alerts when I transact.


Portfolio Holdings

Last week, my portfolio had a good week, outperforming the ASX200, which rallied 2.7%. – Only Myer continues to frustrate me.

  • ANZ Bank (ANZ) +3.4%.
  • Ansell (ANN) +4.2%.
  • Bank of Queensland (BOQ) +2.0%.
  • Challenger (CGF) +2.3%.
  • Commonwealth Bank (CBA) +2.9%.
  • Flight Centre (FLT) + 2.5%.
  • Insurance Australia Group (IAG) +3.0%.
  • Myer Holdings (MYR) +1.1%.
  • Seven West Media (SWM) +6.5%.

*I may consider switching all or part of Myer into Challenger, which I consider better value at current levels – see alerts.
** Any further Ebola scares are likely to hurt FLT, but if we back mankind to deal with this medical issue, it will become an excellent buying opportunity.

  • Cash, around ~5%.


Australian ASX200

I am now 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 hit my initial retracement target and looks set to embark on a rally into Christmas.
  • The NASDAQ has also hit my retracement target.
  • The Dow & S&P500 are now looking very bullish.

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 – Canadian S&P/TSX Composite Index Monthly Chart

 

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

Most Asian indices are now neutral, but China remains firm.

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 / a weakening Europe has resulted in me now recommending a far more balanced portfolio. I have still have 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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