Market Matters Report / The Hickman Report - Saturday 30th August 2014

By Market Matters 30 August 14

The Hickman Report - Saturday 30th August 2014

The Hickman Report - Saturday 30th August 2014

After a lot of correspondence over recent weeks with subscribers, I have decided to tweak the format of “The Hickman Report”. Further comments and suggestions would be much appreciated as we improve our service and offering.


Overall Market Matters macro view

As most of you know, I look at technical and fundamentals to generate good risk / reward trading / investing opportunities. The reason I look at so many charts each weekend (under ½ attached) when the phones aren’t ringing, is to find a few gems of clarity in what is normally a lot of muddy water. I do not believe in trying to “curve fit” various technical methods of trading to a chart, but when one is clear I then take notice.

The clearest current technical charts:

Bullish: The Russell 2000, Eurostoxx 50, Spanish IBEX, German DAX , the Australian banks, Seek (SEK), Resmed (RMD) and the Australian Retail Index look set for fresh 2014 highs.

Bearish: Fortescue (FMG) will test well under $3.90, Newcrest (NCM) will eventually trade under $6.90 and Coca-Cola remains bearish.

My conclusions:

  • The ECB President, Mario Draghi is likely to stimulate aggressively next week. The market is expecting some help, so it will need to be aggressive for the market to receive it positively, but European Indices are suggesting that will occur.
  • Interest rate sensitive stocks are likely to yet again be the main beneficiaries, a mature trend but fundamentally still supported.
  • I still have no interest in buying our resource stocks until we have a capitulation style sell off and it will then be a trade, not a long term investment.
  • Interestingly, when the S&P 500 finished August at a 12-month closing high, 88% of the time September was unkind to US equity investors. I am thinking equities will have a strong start to September and then reverse after the good news arrives (European Stimulus).


What Matters this week

The ASX200 will open around 5635 on Monday only around 55 points below 2014 highs; a great effort with so many large stocks recently trading ex-dividend. The start of the month is statistically a strong time for equities and I think this will occur next week. Monday may be a low volume day for equities with the US closed for Labor Day but this can often lead to large price movements.

 


Potential Investing opportunities for the coming week

  • My “trading” stops on Ansell (ANN) can be raised to $19.20, Challenger (CGF) under $7.40, Insurance Australia (IAG) under $6.30, Myer Holding (MYR) under $2.14 & Seven West Media (SWM) under $1.84.
  • I can buy Harvey Norman around $3.55 (Fridays close) with close stops under $3.35.

Potential Trading for the coming week

  • I am short term positive equities but will be watching European Indices closely for sell triggers if they reach fresh 2014 highs.
  • I can buy Seek (SEK) around $17.50; target $19 with stops under $16.50 – ideal for sophisticated traders via options.
  • I can buy Resmed (RMD) around $5.70; target $6.25 with stops under $5.50 - ideal for sophisticated traders via options.

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


Portfolio Holdings

Last week our portfolio again outperformed the ASX200 which fell 0.35%. Seven West Media must be watched carefully after reacting poorly after its company report due to costs concerns.,

  1. Ansell (ANN) -0.6% but went ex-dividend.
  2. Challenger (CGF) -1.9% but went ex-dividend.
  3. Commonwealth Bank (CBA) +0.9%.
  4. Insurance Australia Group (IAG) +1.67%
  5. M2 Group (MTU) +8.7% and profit taken at these levels.
  6. Myer Holding (MYR) unchanged.
  7. Seven West Media (SWM) -9.1%.
  • Cash, around ~14%.


Australian ASX200

I remain mildly bullish on a short term basis, potentially for another 2-4 weeks but the local index is not as clear as other major indices.

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 not all moving together at present, the Russell 2000 is underperforming as expected but the NASDAQ remains very strong. Technically, I still expect another decent pullback in the S&P after this test of 2000.

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

The DAX and IBEX have basically reached my target areas and I would no longer be short European Indices and in fact would rather be long at current levels.

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 very positive, led by the Hang Seng. The Nikkei continues to be volatile and is now threatening a decent “ABC” style correction.

The China Index remains bearish long term with another +18% downside, however, short term I think the strength looks likely to continue.

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 small 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.

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 is looking choppy and is currently holding after a good bounce, I am 50-50 just here.




Commodities

Gold remains volatile moving me to a 50-50 scenario that it may “abc” up towards US$1,400/oz., or fall towards 1,100/oz.

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 definitely pricing this area to hold comfortably which I believe is dangerous.

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

Reports and other documents published on this email (‘Reports’) are authored by Market Matters independently of Shaw Stockbroking Limited (‘Shaw’). The Reports represent the views of Market Matters and those views may be contrary to views expressed by Shaw, Shaw Research and Shaw advisers. The Hickman Report is based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is, or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position.
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The author holds an interest in the financial products of ANN, CBA, CGF, IAG, KDL, MYR & SWM.