Market Matters Report / The Hickman Report - Sunday 28th February 2015

By Market Matters 28 February 15

The Hickman Report - Sunday 28th February 2015

The Hickman Report - Sunday 28th February 2015

Afternoon All,

The Australian ASX200 continues to trade strongly compared to its US counterpart with the local market closing up +0.8% last week compared to the Dow which was down a few points. The equity market remains focused on interest rates with the US favoured to start raising rates from June whereas Australia is expected to cut at least once more in 2015.

I believe that the ASX200 will outperform US equities in 2015 with interest rate changes being the major driver.

The market valuation (PE – price to earnings ratio) is at its highest level for the last decade, in very expensive territory before considering interest rates. The problem looking forward is we actually have deteriorating earnings, a forecast that is confirmed by a falling $A. Inflationary expectations in the US are rising confirming that the current strength in US economy is too high for a zero interest rate policy hence my caution on US equities for the medium term. It’s been a long time since equities were so driven by on one issue, i.e. “free money”, analysts at CBA recently stated that 25% of worldwide central banks reserves now carry a negative yield, these clearly are not normal times. Short term the local market is getting excited around the prospect of another rate cut next Tuesday, I believe it’s a coin toss and no cut is likely to see some short term weakness in the ASX200.

Overall I remain bullish for coming few months but a 3-4% retracement would not surprise and should be bought.

• Statistically Australian Banks are up 2.47% in March (75% win rate) and 3.24% in April (87% win rate); stay on board for the ride! – source www.probabilitytrader.com

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

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

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

Summary:

• 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 am currently slightly short the ASX200 through sold March 5950 calls but around 25% usual size.

*Watch for alerts

What Matters this week

The ASX200 is looking to open 10 points higher on Monday ahead of Tuesday’s RBA interest rate decision.


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 am 50-50 just here on the index after Friday’s strong rally, ahead of the RBA decision on Tuesday.
• I still like the REIT’s and CGF at current levels.


 

Portfolio Holdings

My portfolio slightly outperformed last week, the ASX200 rose 0.8%.

1. Challenger (CGF) +0.6% - medium term investment.
2. Commonwealth Bank (CBA) +1.9% - Long term investment.
3. National Australia Bank (NAB) +1.1% - Medium term investment.
4. Telstra Corporation (TLS) -3.6% (traded ex-dividend) - 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) Daily 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) 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

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) Weekly

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

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The author holds an interest in the financial products of CBA, CGF, KDL NAB, and TLS.