Market Matters Report / The Hickman Report - Saturday 28th June 2014

By Market Matters 28 June 14

The Hickman Report - Saturday 28th June 2014

The Hickman Report - Saturday 28th June 2014

 



Market Matters Summary for Saturday 28th June 2014

  • The ASX200 closed up just 26 points (0.5%) last week outperforming markets in the US & Europe that were slightly negative. Overall we experienced a very quiet week dominated by the looming Financial Year End domestically.
  • We have now witnessed a very boring 19 weeks with the ASX200 trading in an extremely tight range between 5555 and 5289, I believe cracks are slowly appearing to support my evolving negative view.
  • The Australian Index has been supported by the high yielding financial stocks who are reveling in the current “free money” environment but interestingly on Friday they were the drag on the ASX200. When traders and institutions exit the “carry trade” on mass the sector will fall hard and fast – see my morning report from Friday.
  • A number of excellent traders I know believe that the Fed has distorted natural prices in equities, especially the S&P and have adopted the strategy of “long or out”. This has clearly worked but decent corrections have still occurred as I am targeting now. The current break in the S&P to fresh highs on declining range & volume is usually a bearish signal but as previously mentioned the Fed has both hurt and scarred many a seller over recent years.
  • Last week the DAX feel -1.7% from my sell region, while the Russell 2000 was unchanged and will still ideally make a fresh 2014 high prior to failure, only another 1.9% higher.
  • I remain confident of a decent correction in equities over the coming 1-2 months.
  • 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 +40% in cash, and net short via options, looking to buy a correction, please note I am still net bullish for the next year, or two and will buy any decent correction in world indices. 


What Mattered Last Week

Last week was very choppy for the ASX200 on a daily basis but basically unchanged overall for the week. With little leads from overseas the bounce in Iron Ore was the standout aiding rallies in BHP, FMG and RIO. The intraday volatility is often the precursor for a change in trend which what I am looking for now.

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

  • Positive Performance – Challenger (CGF) +2.2%, Fortescue Metals (FMG) +7.8%, IAG +1.5%, Myer (MYR) +4.4%, Primary Health (PRY) +4.6%, RIO +2.6%, Tatts Group (TTS) +4.6% & Telstra (TLS) +1.7%.
  • Negative Performance – CSL -0.8%, Metcash (MTS) -2.9%, Seek (SEK) -1.8% & Sydney Airports (SYD) -3%.
  1. I remain approx. 40% in cash, with equal weighting in Flight Centre (FLT), M2 Group (MTU), OZ Minerals (OZL) & Suncorp (SUN). 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 “cashed up” looking to buy weakness, I am giving my current 4 positions a little more room than usual with regards to stops. Also note from my positions I am net negative the overall index via XJO options 
  2. Patience is starting to pay off with a few stocks approaching to my buy levels plus I bought FLT last week.

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 (1.9% higher) followed by reversals in all major equity indices, I believe falls have commenced in Europe.
  • 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. The Fed’s ability to support equities is likely to continue for a while longer in the bigger picture.
  • Monday is the “end of financial year” where Tax selling and bizarre price action is often witnessed creating opportunities. 
  • Technically I can be short the ASX200 with stops above yesterday’s high at 5480.


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 (SUN) over $14.
  • I remain a buyer of Seek (SEK) around $15 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 CSL around $60.
  • My stops on MTU remain below $5.70 and $3.96 for OZL. I will add to my FLT under $42.
  • 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 short the ASX200 with stops over 5480.
  • 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).

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

Bearish: Banks (w), BOQ (w), BHP (w) and (m), China (m), Copper (m), Dax (w), Magellan (MFG) (w), NASDAQ (w), NZ (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 1.91% 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 – Russell 2000 Index 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.

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 recently moving me to 50-50 scenario that it may abc up towards 1400.

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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