Market Matters Report / The Hickman Report Sunday 14 September 2014

By Market Matters 14 September 14

The Hickman Report Sunday 14 September 2014

The Hickman Report Sunday 14 September 2014

 


Overall Market Matters macro view

Last week was similar to recent on the news front, dominated by US interest rate fears rise, plus falling Gold / Iron Ore prices. The US Fed meets on Thursday Australian time and while rates are very unlikely to rise the time for the large change in policy is approaching rapidly. I remain bullish on US rates, targeting at least 3.25% in coming months (approximately 25% higher than the current 2.61% - see chart 6). This is likely to see ongoing weakness from the “yield play” stocks, led by the banks and Telstra. However, the increase in US rates is not all bad news for local stocks, as it is creating a weak $A, which fell over 3c last week, cushioning the falling commodity prices for the local resource stocks.


The clearest current technical charts to me, largely macro this week:

Bullish: US Interest rates to rise, supporting stocks with US earnings e.g. QBE, CSL & ANN.
Bearish: US Interest rates to rise hurting local banks. The ASX200 is bearish targeting sub 5400.

My conclusions:

  • Overall I am negative equities at current levels and see clear risk / reward opportunities to the downside in overseas indices for a 5-10% correction minimum. Hence I would be fussy and buying slowly for investors currently looking to accumulate stocks.
  • I still like our banks and would love to buy a panic sell off in the sector e.g. Macquarie around $53.50 and CBA under $75.
  • I remain on the sidelines in regard to Iron Ore as I feel the market is ignoring the possibility of the commodity staying at $80, or even falling lower. It’s a fascinating battle of trader’s v investors as the trader’s short positions grow but the stocks hang in there…..it will be a BOOM or CRASH when one of the respective groups puts up the white flag.
  • The strengthening USD enhances my very negative view on gold and I have no interest in the sector at current levels.
  • Lastly I am a little nervous about the Middle East and Ukraine at present, there appears to be more “black swan” potentials than usual.

What Matters this week

The ASX200 is looking to open down about 15 points on Monday, around 5,515, but with BHP closing up 26c in the US, the resources and $US earning stocks may cushion any weakness - very similar to Friday's sell off. I expect a test of 5,400 area minimum this month, which coincides with statistics in play, calling the US Indices down for September – see last 2 weekend reports.

 


Potential Investing opportunities for the coming week

 

  • Some of my “trading” stops have been hit as the market weakens: Ansell (ANN) are at $19.10, Challenger (CGF) under $7.40, Insurance Australia (IAG) under $6.05, Myer under $2.25 (triggered) & Seven West Media (SWM) under $1.70 (triggered).
  • I can still buy Harvey Norman around $3.65 with close stops under $3.35.

Potential Trading for the coming week

  • I am now negative equities and would sell any 40 point rallies.
  • My favourite stocks into a sharp selloff are Macquarie around $53.50 and Flight Centre around $42.

 


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

 

Portfolio Holdings

Last week my portfolio had a very poor week underperforming the ASX200 which fell 1.2%. This is an excellent period for my short calls (Sophisticated investors only).

  1. Ansell (ANN) +0.1%.
  2. Challenger (CGF) -2.6%.
  3. Commonwealth Bank (CBA) -1.3%.
  4. Insurance Australia Group (IAG) -5.1% BUT went ex-dividend.
  5. Myer Holdings (MYR) -16.5%.
  6. Seven West Media (SWM) -3.7%.


* Please note I have held my stocks as I am short calls BUT otherwise I would be out of both MYR and SWM. I like the retail sector at present and while analysts are scrambling to downgrade MYR the crowd often get it wrong and create opportunities and I have a feeling this may be such a case.

  • Cash, around ~15%.


Australian ASX200

I am negative the ASX200 over coming weeks and will be watching potential catalysts for acceleration closely.

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 strong. Technically, I still expect another decent pullback in the S&P soon but no triggers at present.

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 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. Stocks with US earnings are clearly the place to be 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 Chart

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


Commodities

Gold is 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

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.