Market Matters Report / The Hickman Report - Saturday 29th November 2014

By Market Matters 29 November 14

The Hickman Report - Saturday 29th November 2014

The Hickman Report - Saturday 29th November 2014

Overall Market Matters macro view

Just when it felt safe to get back into the market with Iron Ore behind us, along came Crude Oil’s plunge courtesy of OPEC. Friday’s massacre of oil stocks seemed to flow though to most other sectors of the Australian market with the noticeable exception of Iron Ore stocks, where some short covering is emerging. The oil slide clearly caught a number of people off guard locally, with some of our large oil stocks falling a massive 6-13% with price action that felt like a crash. When we consider what’s hit the ASX200 recently it’s not surprising that we are languishing 6.5% below 2014 highs while the Dow and German DAX are flirting with fresh all-time highs.

  1. Iron Ore falling around 30% in 5 months.
  2. Crude Oil falling over 35% in 6 months.
  3. Gold recently hitting fresh 4 year lows.
  4. Large downgrades hitting some of our stocks, including Woolworths.

Our market is being held together by the banks which are nervous with the Murray inquiry looming in coming weeks. However, remember 10-year bonds are yielding only 3.04% and inflation expectations are pointing to lower interest rates for much longer, which should be very bullish for both equities and property in years ahead. I still feel the local banks can rally hard after the Murray findings are announced, “sell on rumour, buy on fact”.

Let’s again stand back and consider what I am forecasting for the rest of 2014 and 2015. Other major indices are following the map perfectly, BUT the ASX200 is unfortunately trickier at present.

  1. I still anticipate a classic Christmas rally into a major top; I now doubt whether the ASX200 can break much over 5450-5500. For me to be comfortable with this scenario, I do not want to see the market below 5300 for very long next week. Interestingly, last December we rallied 355 points from the 12th, but we fell 305 points in the first two weeks. 
  2. I remain comfortable with my view of a 2000-2500 pullback in the DOW approximately 15% (Phase 4 on chart 14), creating another great buying opportunity. I am envisaging this pullback will take the ASX200 back towards the 5000 level. Ideally before this pullback occurs, the US Indices will rally another 3% and the German DAX about 5%.

I often say “The Australian market leads in big tops and bottoms” and the current price action locally adds to my comfort of the pending large correction for world equities.

This week there are few new clear current technical charts, but the quality is again good:

Bullish: US Indices should trade another 3-4% higher, European Indices are still bullish targeting fresh 2014 highs, the Chinese Index looks set for strong gains, the Gold Sector still looks bullish, BHP is positive short term, targeting over $34, Seek (SEK) remains bullish, targeting $19.

Neutral: The ASX200 is not bullish on a short term basis until we see a false break below 5293.

Bearish: The US Indices are heading for a 15% correction in coming months, I remain bearish Woolworths (WOW) long term, targeting under $25, I remain bearish BHP longer term, Macquarie Group (MQG) is targeting $55, New Zealand’s Index looks to have commenced a 10% correction.

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 down 20 points on Monday, around 5290; I will be positive short term if the market does not break too far under 5300.


Potential Investing opportunities for the coming week

  • I remain a “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 into weakness early next week and may add to my Newcrest (NCM) option position.
  • I like Oil Search (OSH) around $7.75 with stops under $7.50.

Potential Trading for the coming week

  • Iron Ore stocks should continue to bounce e.g. RIO and Fortescue (FMG).
  • I am less confident on BHP after Friday night’s move and would operate stops under $30 – likely to open around $30.35 on Monday.

 


  • Watch for specific ideas in morning reports and Alerts when I transact and stocks hit our levels.


Portfolio Holdings

My portfolio had an average week underperforming the ASX200 which rallied 0.2%. Challenger is a major concern after Fridays Department of Social Services announcement of changes to Care Annuity downgrading the stock by 4% - now we know why the price action has been poor!!

  1. Bank of Queensland (BOQ) +1% - Medium term investment.
  2. Challenger (CGF) -3.9% - Medium term investment.
  3. Commonwealth Bank (CBA) +0.8% - Long term investment.
  4. Insurance Australia Group (IAG) +0.8% - Medium term investment – sold Friday morning.
  5. Regis Resources (RRL) -5.9% - short term trade / investment.
  • Cash, around ~15%.

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% 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 still 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, China is starting to look very bullish as it opens its market to offshore investors.

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, except Challenger, and still anticipate selling all / part in coming weeks.

Chart 23 – BHP (US) Monthly Chart

Chart 24 – Oil Search (OSH) 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 its consolidation and is now heading back towards 81c area.


Commodities

Gold fell hard on Friday as the oil price crash pushed inflation targets even lower, I remain bullish and need a clear break of $US1200 to confirm my view.

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 but a bounce / consolidation is due.

Iron Ore is showing no signs of a bottom but interestingly some short covering is emerging in the stocks.

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


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