Market Matters Report / The Hickman Report - Saturday 7th March 2015

By Market Matters 07 March 15

The Hickman Report - Saturday 7th March 2015

The Hickman Report - Saturday 7th March 2015

Afternoon All,

The Stock Market is currently unfolding exactly as we’ve anticipated. Last week the ASX200 was -0.5%, the Dow -1.5%, the German DAX +1.3% and the Nikkei +0.9%. The picture is clear; where Central Bank Stimulus remains robust, equities are strong, BUT in the US where rates are expected to rise later this year, stocks have started to underperform. On Friday, night we saw another demonstration that strong economic data can be very negative for equities – the US Jobless Rate fell to a healthy 6 ½ year low of 5.5%, resulting in the Dow falling almost 300 points (-1.5%). US 10-year bond interest rates have already risen to 2.24% from 1.65% last month – see chart 7.

• In my opinion, anybody not acknowledging that the current 6-year bull market by US equities, for an appreciation of around 300%, has been significantly aided by the Federal Reserve’s basically zero interest rate policy is naïve.

Hence my fundamental view that US equities will witness a 15% correction in 2015 as the market accepts interest rates are going to rise – this opinion is strongly supported by my technical interpretation. I reiterate this is now only a retracement back to the recent levels of last October, barely a “blip” in the big picture. There are so much exciting scenarios unfolding at present that I‘m going to present my views in simple bullet point form for clarity:

1. I expect the ASX200 to pullback towards 5750 area in coming days/weeks, prior to one final push towards 6200, likely in the seasonally strong April.
2. I will look to trade this last rally, BUT I also anticipate moving to well over 50% cash in April if the market continues to unfold as expected.
3. I see the European markets unfolding very similarly to the Australian, but I am now 50-50 whether the US Indices have already topped out for 2015.
4. I remain confident that we will experience a 15% correction from US equities in 2015.
5. The REIT’s (Real Estate Investment Trust) Index remains my favourite technically at present.
6. I intend to move from a “yield play” based portfolio to a more diversified growth based one in coming weeks/months.
7. As an investor I remain bearish on the resources sector, with Iron Ore trading at a 6% discount to the current price, both 12 & 24 months in the future, why be positive?
8. However, I could buy Fortescue Metals (FMG) as a trade via options around $1.80 ~15% lower.
9. Gold stocks concern me at present and I have NO interest in buying the current weakness.

Bullish: The ASX200 while over 5595(weekly), Challenger, Crown, European Indices (especially Spain), Chinese Index, Banks (medium term), Healthcare sector, Macquarie, REIT’s.

Neutral: RIO, FTSE, Hang Seng, Nikkei and Newcrest (NCM).

Bearish: ASX200 back to 5750 (daily), Copper, Crude Oil, IAG, Iron Ore, BHP (long term), US equities (short term), Seek (SEK) short term, Regis (RRL) and Woolworths (long term).

Summary:

• No significant change, I continue look for ideal areas to tweak my portfolio over the coming weeks. I am considering the below:

1. Sell part of my overweight (ex div.) CBA and switch into soon to be dividend paying Crown.
2. Sell all/part of my Telstra and switch into Vocus (VOC) for greater growth – ex-div. and after I have held for 45 days for franking credits.
3. Potentially switch more of my bank exposure after historically strong performing April into cash, or a REIT.
4. For traders – I can sell XJO March calls into intraday rallies and buy FMG calls/call spreads basis the stock around $1.80.

*Watch for alerts

What Matters this week

The ASX200 is looking to open 60 points lower on Monday after the Dow’s 1.5% fall on Friday night.


Potential Investing opportunities for the coming week

• I remain long the yield play, but will be looking to switch part of my holdings in coming weeks/months.
• Short term I prefer NAB over other banks for future dividend in May.
• I prefer VOC over Telstra for growth over coming years.

Potential Trading for the coming week

• I believe we will see a choppy retracement back towards the 5750 area for the ASX200, hence sell rallies.
• I can buy FMG calls / call spreads if the stock trades back towards $1.80.


 

Portfolio Holdings

My portfolio performed in line with the broader market last week, the ASX200 fell 0.5%.

1. Challenger (CGF) -0.4% - BUT traded ex-dividend, medium term investment.
2. Commonwealth Bank (CBA) -0.9% - Long term investment.
3. National Australia Bank (NAB) +0.2% - Medium term investment.
4. Telstra Corporation (TLS) -1.4% - Medium term investment.

• Cash for future purchases, ~10%.

Australian ASX200

I am looking to spread my portfolio into more growth stocks in 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 ASX200 REIT Index Monthly Chart

Chart 6 Volatility Index VIX Weekly Chart

Chart 7 – The US 10 year Interest Rate Monthly Chart

 

American Equities

The American indices are now positive with close stops.

Chart 8 – Dow Jones Index Monthly Chart

Chart 9 – Dow Jones Index Daily Chart

Chart 10 – S&P500 Monthly Chart

Chart 11 – S&P500 Weekly Chart

Chart 12 – Russell 2000 Index Monthly Chart

Chart 13 – NASDAQ Weekly Chart

Chart 14 – The Stock Market Cycles

 

European Indices
European Indices look set to rally another 6-8% on ECB stimulus.

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 neutral at present. However, China remains bullish as it opens its market to offshore investors.

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 industrial stocks that are performing are now looking good.

Chart 23 – BHP (US) Monthly Chart

Chart 24 – BHP 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 – Regis Resources (RRL) Weekly Chart

Chart 31 – Barrick Gold Corp. (US) Monthly Chart

Chart 32 – CBA Quarterly Chart

Chart 33 – ANZ Bank (ANZ) Monthly Chart

Chart 33b – ANZ Bank (ANZ) Daily 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 49– Stockland (SGP) 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 ultimate technical targets now well under 70c.


Commodities

I remain bullish Gold targeting the $US1400/oz. area but stocks have reached my target area so I am now neutral.

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 remains negative at present but a bounce / consolidation I believe is now underway.

Iron Ore is 50-50 here, BUT the trend is down.

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,

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 CBA, CGF, KDL NAB, and TLS.