Market Matters Report / The Hickman Report Saturday 4th October 2014

By Market Matters 04 October 14

The Hickman Report Saturday 4th October 2014

The Hickman Report - Saturday 4th October 2014

*There will be no Morning Report on Monday as it is Public holiday, however a brief afternoon report will be distributed to cover Monday's trading.

Overall Market Matters macro view

The weakness in Australian equities accelerated into Wednesday morning, until recovering a healthy 1.4% to close the week marginally higher. However, next week will be a test of the domestic market, as even with the Dow rallying over 200 points on Friday, the futures are pointing the ASX200 to open up only around 10 points due to very weak commodity markets and related stocks e.g. BHP closed down 47c in the US. On Friday night, the US employment data was better than expected, with unemployment in the world’s largest economy falling to a 6-year low.  The flip side of this is the $A falling to a 4-year low, posing the question of whether the selling off in local stocks will resume from overseas players.

Last week I mentioned the lead story in the weekend Financial Review implying doom and gloom for equities was a “Buy Signal” and not surprisingly we got a 3.5% rally in Commonwealth Bank (CBA) shares from Tuesday. However, I am 50-50 as to whether we have seen a major swing low in equities or if another leg is around the corner, but I would purchase stocks if we get fresh lows in the ASX200 below 5200, I believe it will be an excellent opportunity to accumulate quality stocks.

This week’s clearest current technical charts are again a mixture of macro and stocks with a few subtle changes:

Bullish: US Interest rates to rise, $US to rise, The US Russell 2000 & Canadian Indices hit retracement targets buy triggers very close, Bank of Queensland (BOQ) is a buy under $11.50, Flight Centre is a buy under $42, Seek is buy around $15.

Bearish: $A to fall against the $US, gold remains very bearish, and commodities stocks remain bearish.

My conclusions:

  • I believe this pullback, which may be complete, is one to be bought and nothing more sinister.
  • I am now 50-50 local equities at the 5300 area but would definitely be allocating cash into the market on the back foot and aggressively under 5200.
  • The correlated Canadian Index / Russell 2000 hit my retracement targets removing my negative bias but the falling $A / commodities has me cautious for further falls.
  • If stocks hit buy zones do not be afraid to “pull the trigger”.

What Matters this week

The ASX200 is looking to open up about 10 points on Monday, at around 5330, not very exciting after a 209 point bounce from the Dow.


Potential Investing opportunities for the coming week

  • My “trading” stop remains for Ansell (ANN) are at $19.10, the stock is holding very well in this weak environment.
  • I can still buy Harvey Norman around $3.60 with close stops under $3.35.
  • I am a buyer of Bank of Queensland (BOQ) on dips towards $11.50.
  • I am a buyer of Seek (SEK) around $15.
  • I am a buyer of Flight Centre (FLT) in the $40-42 area.

Potential Trading for the coming week

  • I neutral at the 5325 area short term and will await further developments.
  • Traders can chance their arm in Fortescue (FMG) around $3.15 looking for a $1 bounce.
  • I can buy Fairfax under 80c with stops under 65c.

 

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

Portfolio Holdings

Last week my portfolio had a poor week again underperforming the ASX200 which rose 0.1%. This is remains an excellent period for my short calls (Sophisticated investors only).

  1. Ansell (ANN) -0.3%.
  2. Challenger (CGF) -4%.
  3. Commonwealth Bank (CBA) +1.9%.
  4. Insurance Australia Group (IAG) -0.5%.
  5. Myer Holdings (MYR) -2.6% 
  6. Seven West Media (SWM) +0.3%.

*Please note I have held my stocks as I am short calls BUT otherwise I would be out of all except Ansell.

*I will be revaluating a number of above closely this week as my patience is getting stretched and quality stocks that I have been waiting for weeks to purchase are close to buy levels e.g. Flight Centre (FLT). Any further Ebola scares are likely to hurt FLT but if we back mankind to deal with this medical issue it will become an excellent buying opportunity.

  • Cash, around ~15%.

Australian ASX200

I remain negative the ASX200 over coming weeks and will be watching correlation with the $A closely. I am looking to increase equity holdings over coming weeks.

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 have not moved together but the Russell 2000 has now hit my initial retracement target and we could be potentially about to embark on a rally into Christmas.

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

I would still rather be marginally long at current levels looking to add into fresh recent lows and reverse into any failure of fresh highs for 2014.

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

Most Asian indices are now neutral but the Nikkei and China remain firm.

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 far more balanced portfolio. There are ongoing clear 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 in Australia. Stocks with US earnings are clearly the place to be overweight at present and I remain comfortable to be out of resources.

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 looks to have “cracked” and technically I am ultimately targeting the 81c area.


Commodities
Gold remains very weak and I believe it falls towards the US$1,100/oz area.

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 still plumbing 5 year lows and related stocks are starting to “get the wobbles”.

Chart 61 – Gold Monthly Chart

Chart 62 – Copper Weekly 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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