Market Matters Report / The Hickman Report - Saturday 2nd February 2015

By Market Matters 07 February 15

The Hickman Report - Saturday 2nd February 2015

The Hickman Report - Saturday 2nd February 2015

Afternoon All,

Last week was a simple continuation of the recent trend, with a touch of acceleration thrown in for good measure as the RBA cut interest rates to 2.25% on Tuesday. The ASX200 made history on Friday, rallying for 12 consecutive sessions, closing up almost 10% in the advance, at 5820 after touching 5850 in the morning.

The natural human instinct is to now take profit and feel like a hero, BUT remember statistics and the trend:

• Since 1959 after the All Ordinaries rallied for 10 consecutive days, closing at a 1 year high, the Index was higher in both 10 and 20 days’ time on 84% of occasions for an impressive average gain of 1.75% and 2.65% respectively. Hence fight the urge and stay long.
• Secondly, remember the banks, aided by the 45-day holding rule, have rallied over the last 16 years an average of 5.7% in March and April = stay long.

As I have said previously, when the market is analysed in traditional ways, it is fully valued at current levels, but we are in the middle of a “yield buying frenzy” and the market remains cheap when compared to bonds. On Friday ANZ Bank (ANZ), Commonwealth Bank (CBA) and Westpac Bank (WBC) traded at all-time highs and all of the above suggests there is more to come. Thursday will be critical to the short term direction of the ASX200, with both CBA and Telstra reporting what are expected to be huge profits.
There is a second very supportive factor in play at present and that’s a falling $A, this is very supportive of stocks at present for two reasons – since mid-January the ASX200 is up 10.5% while the Dow is up only 1.8%. A subscriber Michael summed this up perfectly in an email to me on Friday:

1. In July 2014 CBA hit $83.92 when the $A was at 93c, on Friday CBA hit $93.96 with the $A at 78c. Hence, to overseas investors with $US CBA has fallen from $US78 to $US73.20, a 6% decline – Thank you Michael!
2. Commodities are getting hammered at present as we all know, but the 34% drop in Iron Ore since July is only a 22 % fall when converted to $A which is what matters to Australian companies. This is cushioning the declines in the resources sector.

This week the clear technical charts are again aligned with above comments:

Bullish: The ASX200 while over 5590, European Indices (especially Spain), Chinese Index, Banks, FMG short term target $2.90, Banks, Seek (SEK) and short term Suncorp (SUN).

Neutral: RIO, Hang Seng, Nikkei, Newcrest (NCM), Regis (RRL).

Bearish: US equities, Interest Rates, Copper, Crude Oil, Iron Ore, and BHP – longer term.

My conclusions:

Overall boring with no change:

• Telstra (TLS) and the Banks will continue perform well in coming months.
• Watch bond markets carefully for any move away from “cheap money”.
• I have no interest in the commodity space for investing but it will provide some good trading opportunities.

What Matters this week

The ASX200 is looking to open 10 points lower on Monday after the Dow fell 60 points on Friday night.

 


Potential Investing opportunities for the coming week 

• I remain long the yield play with fingers crossed on CBA and TLS earning reports.

• Short term I prefer TLS and CBA to cash for February dividends and NAB and other banks for future dividends in May.

Potential Trading for the coming week

• I am a short term seller of the ASX200, targeting 5,775 area prior to becoming a buyer.
• No clear individual stock opportunities are at current levels. 


 

Portfolio Holdings

My portfolio outperformed slightly as the ASX200 rose 4.1%.

1. Bank of Queensland (BOQ) +6.65% - Medium term investment.
2. Commonwealth Bank (CBA) +4.1% - Long term investment.
3. National Australia Bank (NAB) +4.4% - Medium term investment.
4. Telstra Corporation (TLS) +1.4% - Medium term investment.

• Cash for future purchases, ~10%.

Australian ASX200

I am looking to buy weakness in high yielding stocks, likely simply adding to banks e.g. a $4 a retracement in CBA.

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 will ideally correct 10-15% over coming months BUT I am 50-50 here exactly how the ASX200 will react.

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

European Indices look set to rally another 6-8% on ECB stimulus..

Chart 15 – Euro Stoxx 50 Weekly Chart

Chart 16 – FTSE Weekly Chart

Chart 17 – Spanish IBEX Monthly Chart

Chart 18 – German DAX Monthly Chart

Chart 19 – German DAX Daily Chart

 

Asian Indices

Asian indices are neutral at present. However, China remains 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

Quality stocks with sustainable yield remain standouts. The overall trend in commodity based stocks unfortunately remains bearish.

Chart 23 – BHP (US) Monthly Chart

Chart 24 – BHP Daily Chart

Chart 25 – Woodside (WPL) Daily 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 – 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) Quarterly Chart

Chart 45 – Seek Ltd (SEK) Weekly Chart

Chart 46 – Telstra (TLS) Monthly Chart

Chart 47– M2 Group Ltd (MTU) Monthly Chart

Chart 48 – Vocus Communications (VOC) Weekly 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– Myer Holdings (MYR) Weekly

Chart 57– JB Hifi (JBH) Monthly

Chart 58– Harvey Norman (HVN) Monthly

Chart 59– Australian Dollar (AUD) Weekly Chart

The $A continues to decline with ultimate technical targets now well under 70c.



Commodities

I remain bullish Gold targeting the $US1,400/oz area, but stocks have reached my target area so I am now neutral.

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 I believe is now underway.

Iron Ore has now commenced another leg to the downside.

Chart 60 – Gold Monthly Chart

Chart 61 – Gold (in $A) Quarterly Chart

Chart 62 – Copper Monthly 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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The author holds an interest in the financial products of BOQ, CBA, KDL NAB, and TLS.