Market Matters Report / The Hickman Report - Saturday 30th May 2015

By Market Matters 30 May 15

The Hickman Report - Saturday 30th May 2015

The Hickman Report - Saturday 30th May 2015

Afternoon All,

Sorry for the late report but we have expanded the Market Matters office, which had a few teething issue, but I am now writing to you directly! Also, if I missed answering a few questions during the transition please resend and I will address asap.

An interesting week that saw the ASX200 gain 2% while the Dow fell 1.2%. I believe that two factors helped the local market:

· A 1.75c fall in the local dollar $A brought buying into the companies with overseas earnings and potentially some offshore buyers dipping their toes back in our market.

· A correction to the recent perceived risk in local interest rates - since March 2015 the markets went from pricing rates at 1.75% to 2.25% by March next year, they have now returned to around today's RBA's 2% rate i.e. interest rates unchanged for the next 6-9 months.


I think the bond market is the tail that's wagging the dog at present in Australia, fundamentally the bonds feel at about fair value here so it's not surprising that equities have struggled for direction over recent times. As I discussed in last week's webinar this is a time for patience more than action, remember market trade sideways over 85% of the time so it's nothing unusual. I'm sorry for some people who I feel I have been negative of late, but there's nothing more negative than losing money.

· While I remain confident that the Dow will correct ~15% in 2015 I have no signals from the local ASX200 at present but holding some cash for a few months has not been painful so far.

· Also, a 15% correction in the Dow is not negative it's a very exciting opportunity.


When I was "trading" for Goldman Sachs I learnt fairly quickly that you make 90% of your profits in other words just 2 days of the month and one should be happy to turn the screens off and sleep if nothing looks clear - I made well over 1/2 of one year's profits in a 12 hour trading session in the Euro - USD. Now most people who read Market Matters are investors, which is now far my main focus, but the %'s are certainly comparabler - when you are in cash as an investor you are powerful, especially compared to having bought a poor stock on a whim.

· Remember we sold CBA close to $95 which still feels good after the stock has bounced from $81 to $85.

So please don't judge us on a few weeks inactivity, I can assure you I love trading more than watching but they both have there place.


Summary:

No major change here:

1. I will remain patient on purchasing banks but yield hungry investors may want to consider purchasing a % into likely weakness early on Monday, I would select BOQ if not owned and ANZ / CBA from the “Big Four”.

2. I continue to have no interest investing in the resources sector.


What Matters this week

The ASX200 looks likely to open down 20 points on Monday.

 


Potential Investing opportunities for the coming week

· Hopefully investors are now sitting on a healthy cash position awaiting buying opportunities – see above.

Potential Trading for the coming week

· None at present in the local market, if the US follows through down on Monday I think there is an excellent possibility it will accelerate down.



Portfolio Holdings

My portfolio undeformed the market last week where the ASX200 rallied 2%.


1. Bank of Queensland (BOQ) +1.8% - medium term investment.

2. Mirvac (MGR) +1.8% - medium term investment.

3. Vocus (VOC) -0.8% - Medium term investment.

Cash for future purchases, ~45%.


Australian ASX200

I continue to look to spread my portfolio into more growth and offshore earning stocks going forward but importantly patiently.

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 ASX200 REIT Index Monthly Chart

Chart 5b ASX200 Banking Index Monthly Chart

Chart 6 Volatility Index VIX Weekly Chart

Chart 7a – The US 10-year Interest Rate Quarterly Chart

Chart 7b – The German 10-year Interest Rate Quarterly Chart


American Equities

The American indices continue to show signs of topping out for 2015.

Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Dow Jones Index Daily Chart

Chart 10 – S&P500 Monthly Chart

Chart 11 – NYSE Composite Index Monthly Chart

Chart 12 – Russell 2000 Index Monthly Chart

Chart 13 – NASDAQ Monthly Chart

Chart 14 – The Canadian Composite Monthly Chart


European Indices

European Indices still look have the potential to rally another 2-3% aided by ECB stimulus but Friday was surprisingly weak.

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 very bullish at present, led by China as it opens its market to offshore investors, Japan is still receiving great strength from ongoing aggressive QE.

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 have been standouts but some industrial stocks are now looking better. I no longer am a net seller of the “yield play” after its 15% correction and looking to buy growth / yield stocks BUT not resources.

Chart 23 – BHP (US) Monthly Chart

Chart 24 – BHP Weekly Chart

Chart 25 – Woodside (WPL) Monthly Chart

Chart 25b – Santos (STO) Weekly 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 32b – CBA Daily Chart

Chart 33 – ANZ Bank (ANZ) Weekly Chart

Chart 34 – Westpac Bank (WBC) Weekly Chart

Chart 34b – Westpac Bank (WBC) Daily Chart

Chart 35 – National Bank (NAB) Weekly Chart

Chart 36 – Macquarie Bank (MQG) Monthly 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 48b – TPG Telecom (TPM) Monthly Chart

Chart 49 – Westfield Corp. (WFD) 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 – Crown (CWN) Monthly

Chart 55 – Coca-Cola Amatil (CCL) Monthly

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 an ultimate technical target now well under 70c.


Commodities

I am now neutral Gold as rising interest rates could easily derail the recent strength. I have divergence with the stocks and precious metal.

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 has bounced as anticipated; I still expect renewed weakness over coming months.

Iron Ore is 50-50 here BUT the trend is clearly down and long term futures remain bearish.

Chart 60 – Gold Monthly Chart

Chart 61 – Copper Monthly Chart

Chart 62 – Crude Oil Monthly Chart

Chart 63 – 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,

MarketMatters Team


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The author holds an interest in the financial products of BOQ, MGR, and VOC