Market Matters Report / The Hickman Report - Sunday 26th April 2015

By Market Matters 26 April 15

The Hickman Report - Sunday 26th April 2015

The Hickman Report - Sunday 26th April 2015

Afternoon All,

Equities had another volatile week but the ASX200 closed extremely strongly on Friday, up over 1.5%, reaffirming my belief that we will test the 6100 area prior to a major correction. As you know I am targeting a major top in coming weeks/months prior to a 15% correction in the US that is likely to drag the ASX200 back around 10% and perhaps more if its higher interest rates that spark the correction. Ignoring my technical analysis when we simply stand back and look at the current market characteristics a decent market correction is easy to foresee - the pieces of the puzzle are coming together:

1. In the US margin debt is reported to be around $US465bn, basically an all-time high, markets often go in the direction of most pain which for the US clearly looks to be down.

2. Since 1945 there have been 27 corrections of 10% or more, this equates to one every 20 months, hence as the DOW has not corrected in 43 months from a timing perspectives we are overdue.

3. Australian Retail Investors / Retirees are chasing the “yield play” with almost no concern to capital risk. Everyone now loves Telstra (TLS) and has totally forgotten that it fell over 70% from late 1999; even CBA has experienced 29%, 13% & 12% corrections respectively since June 2010.

4. Often the underperformers pull the market to fresh highs, prior to a fall, as investors looked for any stocks that are “cheap” – interestingly Fridays rally was driven by the embattled resources sector.

5. The “yield play” has dragged the ASX200 towards 6000 but interest rate markets have recently become less confident of rate cuts going forward, I believe the local banks are going to struggle to meaningfully move over recent 2015 highs, if at all.

6. Overseas equity market have surged on economic stimulus from Central Banks, “free money”, this stock market rally almost has a bubble feel as opposed to classic valuations around company performance pushing shares north.

I want to clarify that this is not a “PANIC REPORT” but planning a strategy for potential bargain hunting e.g. we all know CBA is a great company but if there is a good chance of buying shares 10-15% lower I simply want to have some ammunition in reserve.

Summary:

No major change:

1. I still believe the ASX200 will likely push towards 6100 over coming weeks but I will be selling this strength if it occurs.

2. I am likely to move towards 25-30% cash if the ASX200 rallies towards 6100 with CGF / BOQ likely candidates to be sold into strength.

3. My other 3 stocks IIN, MGR and VOC are not strongly correlated to the index and hence I am more likely to hold.

4. I continue to have no interest investing in the mining sector.

My cash holding is ~20% (swelled by options and recent dividends) but could be interpreted to be higher if we consider that IIN is in a takeover situation.

*Watch for alerts next week.

1. For traders – We clearly took profit a little too early in Fortescue but after being behind still a reasonable result. Also a point of note, call options usually “top” before the stock itself, due to time decay, so I do usually sell a little early.

What Matters this week

The ASX200 looks likely to open up around 40 points higher on Monday, maintaining Fridays momentum.

Potential Investing opportunities for the coming week

· I remain a seller of equities around 6100.

Potential Trading for the coming week

· Unfortunately nothing clear at present.

Portfolio Holdings

My portfolio underperformed with the market where the ASX200 gained +0.9% but FMG trade helped the bottom line nicely.

1. Bank of Queensland (BOQ) -1.5% - medium term investment.

2. Challenger (CGF) +1.1% - medium term investment.

3. iiNet (IIN) -0.5% situation stock.

4. Mirvac (MGR) +4.3% - medium term investment.

5. Vocus (VOC) -0.5% - Medium term investment.

Cash for future purchases, ~20%.

Australian ASX200

I continue to look to spread my portfolio into more growth stocks going forward and importantly cash.


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 7a – Australian 10-year Bonds weekly Chart


Chart 7b – The US 10-year Interest Rate Monthly Chart

 

American Equities

 

The American indices continue to show signs of topping out for 2015 and a final blow-off is starting to feel less likely by the week.

Chart 8 – Dow Jones Index Monthly Chart


Chart 9 – Dow Jones Index Daily Chart


Chart 10 – S&P500 Monthly Chart


Chart 11 – NYSE Composite Index Monthly Chart


Chart 12 – Russell 2000 Index Monthly Chart


Chart 13 – NASDAQ Weekly Chart


Chart 14 – The Canadian Composite Monthly Chart

 

European Indices

 

 European Indices still look set to rally another 2-3% aided by 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 bullish at present, led by China as it opens its market to offshore investors, Japan is receiving great strength from ongoing aggressive QE.

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 some industrial stocks are now looking better. Overall I am now a net seller of the “yield play” and looking to buy growth stocks BUT not resources.

 

Chart 23 – BHP (US) Monthly Chart

 

Chart 24 – BHP Weekly Chart

 

 

Chart 25 – Woodside (WPL) Weekly 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 32b – CBA Daily Chart


Chart 33 – ANZ Bank (ANZ) Monthly 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) Weekly 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