Market Matters Report / The Hickman Report Saturday 5th July 2014

By Market Matters 05 July 14

The Hickman Report Saturday 5th July 2014

The Hickman Report Saturday 5th July 2014

Market Matters Summary for Saturday 5th July 2014

  • The ASX200 closed up just 80 points (1.5%) last week, following markets in the US & Europe that were all higher. However, it was the aggressive 150 point rally after Tuesday’s very weak close that caught the eye. The strength was aided by massive bank dividends (ANZ, Macquarie & Westpac) hitting investors accounts – NAB coming on 8th July.
  • After a boring 20 weeks with the ASX200 trading in an extremely tight range between 5555 and 5289, a move is overdue, after last week’s surge it feels likely to be up towards 5,600 helped by interest rates at a 50 year low.
  • Also, Glenn Stevens of the RBA made a VERY market friendly speech last week for interest rate stocks, offshore earners, and asset plays. The main point seeming to be that a difficult rebalancing is taking place domestically (from mining investment to non-mining), and that until this hand over is confirmed rates are on HOLD. If it is not confirmed (consumer spending, construction, etc.) rates will most likely be cut. Plus the RBA wants the $A lower.
  • I have said over recent months that I am bullish over the next 2-3 years. The All Ordinaries Index is -2.2% (excluding dividends) over the last 7 years. Interestingly, the 3-year returns following a negative stretch of 7-years (financial year end) were always positive recording average gains of 39% with a 15 from 15 win ratewww.ProbabilityTrader.com.
  • Also some bullish seasonality comes from Asia, China’s stock market tends to rally in the second half as the ruling Communist Party takes steps to meet its economic expansion targets, Premier Li Keqiang said last month authorities will “ensure” a minimum growth rate of 7.5%, the government has already eased lending restrictions and accelerated state spending plans to counter a property-market slump.
  • I have been confident of an 8-10% correction over recent months but I have to move to a more neutral stance until sell signals are triggered, fortunately we purchased Ansell (ANN), Flight Centre (FLT) & Seven West Media recently taking our cash holdings down to under 10%.

 


What Mattered Last Week

Last week was again very choppy for the ASX200 on a daily basis, as the Financial Year ended with 3 poor days only for the market to rally 150 points very fast aided I’m sure by massive bank dividends hitting investors accounts.

On the performance front, the below stocks caught my eye over the last 5 trading days:

Positive Performance – BHP +3.2%, Crown (CWN) +5.2%, Flight Centre (FLT) +5.9%, NAB +2.1%, Seek (SEK) +3.5%, QBE +4.6% & Wesfarmers +2.6%.

Negative Performance – Ansell (ANN) -4.3%, Graincorp (GNC) -2%, Origin (ORG) -2.1%, Qantas (QAN) -4.9% & Resmed (RMD) -3.4%.

  1. I am under 10% in cash, with equal weighting in Ansell (ANN), Flight Centre (FLT), M2 Group (MTU), OZ Minerals (OZL), Seven West Media (SWM) & Suncorp (SUN). Also note from my positions I am net negative the overall index via XJO options 
  2. Patience has paid off with a few stocks hitting our buy levels even though the index remains firm.

What Matters this week

  • Technically I am neutral at present but remaining wary of an 8-10% retracement in the US that would enable me to buy aggressively a market I am bullish for next few years.
  • Please note most trading and investing opportunities happen in under 5% of the time, in other words 3 weeks of the year, so patience / planning is vital. Any questions please do not hesitate to contact us.
  • Watch for specific ideas in morning reports and Alerts when I transact.

 


Potential Investing opportunities for the coming week

  • Take profit on Suncorp (SUN) between $13.75 and $14, stops under $13.30.
  • My stops on Ansell (ANN) are under $18.50, Flight Centre (FLT) under $45.15, M2 Communications (MTU) remain below $5.70 and now $4.30 for Oz Minerals (OZL). 
  • I can buy Seek (SEK) around $16.50 with stops under $16.
  • I can buy Resmed (RMD) around $5.35 with stops under $5.15.
  • Gold lovers can buy Newcrest (NCM) under $11 targeting close to $15 with stops at $10.20 – good risk / reward.

Potential Trading for the coming week

  • After last week’s surprising strength in the domestic market I want to sit on the sidelines for a few days.

A list of some sleepers are below, some have already started to show signs of life, we will look to continually add to this list over any weakness:

  • AWC, CSE, CSS, FXJ, KCN, KDL, LEI, & PEN. – I own the ones underlined.

Market Matters’ View at a glance

The below views are illustrated in detail by the charts beneath.

Bullish: ANN (m), CBA (m), CSL (m), Dow (m), Fairfax (m), IBEX (m), Magellan (MFG) (w), MTU (m), NASDAQ (m), Nikkei (m), OZL (m), RMD (w), SEK (m), S&P (m), SUN (m) & Vocus (w)

Neutral: AMP (w), ASX200 (d), Australian Banks (d) & (m), CWN (m), FMG (w), FTSE (w), Gold (w), Hang Seng (w), IBEX (w), NCM (m), NZ (m), REA (m), Retail Index (w), S&P (w), STOXX (w), TLS (m), WOW (m) & WPL (m).

Bearish: BOQ (w), BHP (m), China (m), Copper (m), Dax (w), NASDAQ (w), NZ (w), QBE (w), RIO (w) & WES (w).

  • Time Frames - (d) = daily, (w) = weekly and (m) = monthly.

e.g. A (d) implies I am bullish on a daily basis but a (m) would mean I am bearish on a monthly / longer term basis.

 

Australian ASX200

I remain mildly bullish on a longer term basis, I will aggressively buy any decent pullback.

Chart 1 – ASX200 Monthly Chart 

Chart 2 – ASX200 Weekly Chart 

Chart 3 – ASX200 Weekly Chart 

Chart 4 – ASX200 Daily Chart 

Chart 5 – SPI (Share Price Index) Futures 60 mins Chart 

Chart 6 – Volatility Index VIX Weekly Chart

Chart 7 – The US 10 year Interest Rate Monthly Chart 

Chart 8 – New Zealand 50 Index Monthly Chart

 

American Equities

The American indices reached my sell levels in early March, the NASDAQ then proceeded to fall 8.7%. I now expect another 8-10% fall from the 3900 region that should commence soon, the Russell 2000 reached fresh 2014 highs last week that I have been waiting for so the ducks are aligned for a pullback BUT the market remain resilient.

Chart 9 – Dow Jones Index Monthly Chart 

Chart 10 – Dow Jones Index Daily Chart 

Chart 11 – S&P 500 Monthly Chart 

Chart 12 – S&P 500 Weekly Chart 

Chart 13 – Russell 2000 Index Monthly Chart 

Chart 14 – NASDAQ Weekly Chart 


European Indices

The DAX now looks very vulnerable and similar to the NASDAQ, with failure into current fresh highs my expectation.

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 net positive, but messy short term. The Nikkei continues to be volatile and is now threatening a decent correction.
The China Index remains bearish long term with another +18% downside.

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 is clearly no sign of this at present as financial stocks remain the backbone of the ASX200 and the Reserve Bank confirmed last week lower interest rates are here for a while.

Chart 23 – BHP Weekly Chart 

Chart 24 – BHP Daily 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 - OZ Minerals (OZL) Monthly Chart 

Chart 31 – CBA Monthly Chart

Chart 32 – ANZ Bank (ANZ) Monthly Chart

Chart 33 – Westpac Bank (WBC) Weekly Chart

Chart 34 – National Bank (NAB) weekly Chart

Chart 35 – Macquarie Bank (MQG) weekly Chart 

Chart 36 – Bank of Queensland (BOQ) Weekly Chart 

Chart 37 – AMP Weekly Chart 

Chart 38 – Suncorp Group (SUN) Monthly Chart 

Chart 39 – Insurance Australia (IAG) Monthly Chart 

Chart 40 – QBE Insurance Monthly Chart

Chart 41 – Magellan Group (MFG) Weekly Chart 

Chart 42 – Wesfarmers Ltd (WES) Weekly Chart

Chart 43 – Woolworths Ltd (WOW) Monthly Chart

Chart 44 – Seek Ltd (SEK) Weekly Chart 

Chart 45 – Real Estate Australia Group Ltd (REA) Monthly Chart 

Chart 46 – Vocus Communications (VOC) Weekly Chart 

Chart 47 – Telstra (TLS) Monthly Chart 

Chart 48– M2 Group Ltd (MTU) Monthly Chart 

Chart 49 – Crown Resorts Ltd (CWN) Monthly Chart 

Chart 50– Ansell Ltd (ANN) Monthly Chart 

Chart 51– CSL Ltd (CSL) Monthly Chart 

Chart 52 Ramsay Healthcare (RHC) Monthly Chart 

Chart 53– Resmed (RMD) Weekly Chart 

Chart 54 Fairfax Media (FXJ) Monthly Chart 

Chart 55 – Seven West Media (SWM) Monthly 

Chart 56 Flight Centre (FLT) Monthly 

Chart 57– Australian Dollar (AUD) Weekly Chart

The $A is looking choppy and is currently having a good bounce, with the potential to challenge the 97c area.



Commodities

Gold rallied strongly recently moving me to 50-50 scenario that it may abc up towards 1400.

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 pricing this area to hold.

Chart 58 – Gold Monthly Chart

Chart 59 – Copper Weekly Chart 

Chart 60 – 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.
The Reports contain general, as opposed to personal, advice. That means they are prepared for multiple distribution without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of
a financial advisor.
The Reports are published by Market Matters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports.
If you rely on a Report, you do so at your own risk. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence.
The author holds an interest in the financial products of ANN, AWC, FLT, KDL, MTU, OZL, SUN, SWM & WBC.