Market Matters Report / The Hickman Report Saturday 27th September 2014

By Market Matters 27 September 14

The Hickman Report Saturday 27th September 2014

The Hickman Report - Saturday 27th September 2014

Overall Market Matters macro view

Yet another fantastic day in Sydney, perfect for the Swans!

The sell Australia theme continued yet again last week, with the ASX200 closing down 2.2%, while the Dow was down only 1%. We must also note that although the ASX200 has corrected 6.5% since the August high, but to a US investor it has fallen a massive in 12.2% $US terms. The local stock market remains focused on a falling $A and Iron Ore at present, but we are getting cheaper by the day to offshore investors, when the market perception is the $A has found a base I expect an excellent Christmas rally. One of the main benefits of writing the Hickman Report on a Saturday morning with no phones ringing, or prices flashing on a screen, is some markets I do not focus on day to day can throw up insights that influence my overall view on the markets. This has occurred this week courtesy of the Canadian market.

  • The lead story of this morning’s Financial Review website is “Surviving the great share sell-off”, experience tells me this is a clear “Buy Signal”.

This week’s clearest current technical charts, a mixture of macro and stocks:

Bullish: US Interest rates to rise, $US to rise, European markets remain bullish on a monthly basis, Bank of Queensland (BOQ) is a buy around $11.30, Seek is buy around $15.

Bearish: $A to fall against the $US, gold remains bearish, the NZ market should correct 5% minimum, the Russell 2000 should fall another 3-4%, the Canadian Index should fall another 3% and commodities remain bearish.

My conclusions:

  • I believe this pullback is one to be bought and nothing more sinister.
  • I remain mildly negative local equities at current levels but I am definitely would be allocating cash into the market on the back foot and aggressively under 5200.
  • The correlated Canadian Index is only 3% away from my buy levels while most other major world indices remain choppy but not clear sells.
  • If stocks hit buy zones do not be afraid to “pull the trigger”.

What Matters this week

The ASX200 is looking to open up about 10 points on Monday, at around 5325, not very exciting after a 167 point bounce from the Dow.


Potential Investing opportunities for the coming week

  • My “trading” stop remains for Ansell (ANN) are at $19.10, the stock is holding very well in this weak environment.
  • I can still buy Harvey Norman around $3.65 with close stops under $3.35.
  • I am a buyer of Bank of Queensland (BOQ) around $11.30.
  • I am a buyer of Seek (SEK) around $15.
  • I am a buyer of Flight Centre (FLT) in the $41-42 area.

Potential Trading for the coming week

  • I remain negative equities and would the local market around 5450.
  • Traders can chance their arm in Fortescue (FMG) around $3.25 looking for a $1 bounce
  • I can buy Fairfax under 80c with stops under 65c.

 

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

Portfolio Holdings

Last week my portfolio had an ok week again mildly outperforming the ASX200 which fell 2.2%. This is remains an excellent period for my short calls (Sophisticated investors only).

  1. Ansell (ANN) -0.36%.
  2. Challenger (CGF) -1.5%.
  3. Commonwealth Bank (CBA) -3.3%.
  4. Insurance Australia Group (IAG) +1.3%.
  5. Myer Holdings (MYR) -3.9% but ex-dividend 3% fully franked.
  6. Seven West Media (SWM) -3%.

*Please note I have held my stocks as I am short calls BUT otherwise I would be out of all except Ansell.

  • Cash, around ~15%.

Australian ASX200

I remain negative the ASX200 over coming weeks and will be watching correlation with the $A closely.

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 still not all moving together at present, the Russell 2000 is underperforming as expected but the Dow remains strong. Technically, I still expect another decent pullback in the S&P soon, but no triggers at present.

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 reverse into any failure of fresh highs for 2014.

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 now neutral but the Nikkei 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 has resulted in me now recommending a more balanced portfolio. There are clear signs of this emerging at present from the US, but the local economy and especially Europe are faltering, so rates are likely to remain lower for longer. Stocks with US earnings are clearly the place to be at present.

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.

Iron Ore is still plumbing 5 year lows and related stocks are starting to “get the wobbles”.

Chart 61 – Gold Monthly Chart

Chart 62 – Copper Weekly Chart

Chart 63 – 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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