Market Matters Report / The Hickman Report Saturday 6 September 2014

By Market Matters 06 September 14

The Hickman Report Saturday 6 September 2014

The Hickman Report Saturday 6 September 2014

 


Overall Market Matters macro view

Last week, the ECB (European Central Bank) joined the stimulus party in a major way, spurring European equities higher as we anticipated last week. If I am correct, this rally has a little more to go before a likely significant correction – perhaps the market will become concerned that Mario Draghi may run out of bullets before rejuvenating Europe. On Friday, the US employment data was noticeably poorer than expected, but what caught my eye was the US 10 year yields rising slightly. With almost 40% of the Australian 50 Leaders profits coming from the big 4 banks, it’s no surprise I watch US rates very closely. Domestically, Iron Ore was on most people’s lips, as the commodity fell to fresh 5 year lows, putting pressure on related stocks and the ASX200 in general.


The clearest current technical charts to me, noticeably less than last week:

Bullish: European equities to make fresh 2014 high before failing, the Retail Sector led by Harvey Norman & Myer.

Bearish: Fortescue (FMG) has satisfied my bearish target, but too early to buy, Newcrest (NCM) will eventually trade under $6.90.

My conclusions:

  • The selloff in Iron Ore stocks needs to be watched for opportunities but while people are talking where to buy it’s too early, I want to hear doom and gloom before putting my trading $$’s on the line. 
  • Interest rate sensitive stocks are likely to yet again be solid next week, following the lead from the US on Friday night, a mature trend but fundamentally still supported.
  • The following statistic I mentioned last week appears to be unfolding nicely; 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 have been expecting US equities will have a strong start to September and then reverse after the good news e.g. European Stimulus. I anticipate the positive momentum in Europe to fail shortly, after fresh 2014 highs, which will likely coincide with a correction in most major indices.


What Matters this week

The ASX200 looks set to open unchanged around 5600 on Monday, ignoring the positive US lead weighed down by further weakness in Iron Ore -0.8% at 83.6. After falling 85 points from its highs last week a bounce early this week should occur if the market remains healthy, especially after Fridays aggressive sell off. This week will be an interesting test.


Potential Investing opportunities for the coming week

  • My “trading” stops have been tweaked as some stocks have gone ex-dividend, Ansell (ANN) are at $19.10, Challenger (CGF) under $7.40, Insurance Australia (IAG) under $6.30, Myer under $2.25 & Seven West Media (SWM) under $1.70. Fundamentally I like the current portfolio mix.
  • I can still buy Harvey Norman around $3.75 (Friday’s 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 feel this is a good week to stay on the sidelines and await the above and potential panic selling in Iron Ore stocks.

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


Portfolio Holdings

Last week our portfolio had a relatively poor week underperforming the ASX200 which fell 0.5%. This is a good period for my short calls (Sophisticated investors only).

  1. Ansell (ANN) -1.3%.
  2. Challenger (CGF) -1.3%.
  3. Commonwealth Bank (CBA) unch.
  4. Insurance Australia Group (IAG) +0.2%
  5. Myer Holdings (MYR) unch.
  6. Seven West Media (SWM) -6.2% but went ex-dividend.
  • Cash, around ~14%.


Australian ASX200

I remain mildly bullish on a short term basis, potentially for another 1-2 weeks but the local index remains unclear compared to 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 extremely strong. Technically, I still expect another decent pullback in the S&P after this test of fresh 2014 highs.

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 rather be long at current levels looking to 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

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. The Retail sector is my favourite area for allocation at present.

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 Char

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


Commodities

Gold remains volatile on balance 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 plumbing 5 year lows and related stocks are starting to “get the wobbles”.

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

 

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The author holds an interest in the financial products of ANN, CBA, CGF, IAG, KDL, MYR & SWM.