Market Matters Report / The Hickman Report - Monday October 7th 2013‏

By Market Matters 07 October 13

The Hickman Report - Monday October 7th 2013‏

Hi All, I am writing my report late this week due to interstate travel, Monday being Public Holiday and potential news out of the US around the Debt Ceiling. Unfortunately the US political parties continue to bicker and the US equities have opened down ½% this morning. I feel like there’s no change to my report from recent weeks…….the market wants to “pop higher” but US politics are pulling back the reins.

Basically there has been no major theme change over recent weeks / months = outperformance from Australia. Personally I believe this trend has much further to go as I am hearing plenty of people who have missed out and are hoping for a pullback to buy.

With the historically ideal time to buy equities looming large any sharp selloff in equities in coming weeks courtesy of politicians in America (Government Shutdown) or Europe (Italy raising its head again) should be bought aggressively. Remaining flexible to buy and not panic if we see a sharp selloff makes lots of sense.

Relevant current seasonal statistics:

1. Since 1950 September is the worst performing month for US equities, with the last 2 weeks the focal point.

2.    End of quarter restructuring plus general events has often led to nasty month end sell offs.

3.    Historically buying equities in early / mid October has proven very profitable into the New Year.

 

Bullish:   ASX200 (m), Banks (m), FOX (m), FTSE (w), IBEX (m), NAB (w), QBE (m), SUN (m), WES (m) & WOW (m).

 

Neutral:   AMP (w), ANZ (w), ASX200 (d) & (w), Banks (d), BHP (d) & (w), CSL (m), Hang Seng (w), MQG (w), NASDAQ (d) & (w), Nikkei (m) , NZ (m), RIO (w), SEK (w), STOXX (w), & WBC (w).

 

Bearish:    BHP(d), BHP $US (m), China (w), Copper (m), Dow (d) & (w), Gold (w), NCM (m), RIO (d) & (m), & S&P (d) & (w).

 

I still believe we may have commenced an 8-9% correction in the S&P, but how far the ASX200 corrects, if at all, is much harder!

 

  • This week I would sell any recovery on Monday, 1/2 size, around 5300 basis Dec. SPI with stops over 5320

 

Super Portfolios Holding 

We have followed the plan of the last few months which has worked well with us holding 4 of the best performing stocks at present.

  •  I am long FMG, NAB, SUN and WES, delta neutral short respective calls, plus short XJO strangles net bearish here.
  • Cash, under 5%.

I am a happy buyer of FOX into weakness and Gold stocks if the fall to fresh 2013 lows. Also, I am comfortable to be net long QBE via stock & / or options looking for a weaker $A and higher rates in the US over coming months / years.

 

Australian ASX200

I remain bullish on a monthly basis, targeting a decent break of 5250, when looking at lower time frames and overseas indices a small pullback from here would not surprise but currently every retracement soon reaches hungry buyers. The yearly range targets 5450 and a simple monthly abc targets 5670. 

My biggest concern has come from my target of a 8-9% correction in the S&P, recent price action has proved these concerns to be unwarranted.


 

 

 

 

 

 

American Equities

The American indices still look set to have the predicted 8-9% correction, but I am bullish if we get that retracement – around 14,500 in the Dow. The daily charts are looking poor after failing to hold gains after the unexpected failure to Taper by the FED plus this is historically an awful period of time for US equities BUT early- mid October is also historically the best time to purchase equities.



 

 

 

 

 


European Indices

The European indices now look net bullish  for 2013 with the FTSE starting to look very promising, I would be an aggressive buyer of an “abc” pullback towards 6350. The Spanish IBEX has reached my long term target plus the short term pattern targets a 10% rally minimum. The overall position of the European indices is the reason I have bought NAB ahead of ANZ after CBA went ex-div.





Asian Indices

Asian indices are gaining clarity and becoming positive. The Nikkei is trading out of control, under the weight of stimulus and intervention.





Australian Stocks

Buying sustainable yield and selling XJO calls has been a logical strategy over recent years, however, rising bond yields is taking the tarnish off this space and I am now recommending a more balanced portfolio’sOverall the major stock’s in the ASX200 remain clearly positive but consolidation / a pullback in coming weeks to buy would not surprise. Basically look to buy weakness BUT there may well be some competition – a spike lower courtesy of a US panic around Debt Default would be great risk / reward buying.

 

Stock picking is at a premium as is demonstrated by BOQ outperforming in the Banks and FMG in the resources space.

























Australian Dollar  

The $A is looking very heavy, the recent bounce was a little greater than anticipated breaking 95c, renewed weaknessnow looks likely with an ultimate target of 81-82c. Obviously the currency is caught up in all the US Debt / Shutdown discussions.



Commodities

The Gold chart looks bullish longer term targeting fresh recent highs, likely over $2,000 suggesting inflation - confirmation requires a close over 1480. On a weekly basis Gold and respective stocks are looking VERY bearish targeting new lows for 2013. 

Also, the amount of money tied up in Gold ETF’s that did not exist pre 2004 is extremely scary!

Copper remains negative on a longer term basis, a very similar chart pattern to Newcrest Mining and we all saw what happened there!!




Have a great week,

Shawn Hickman


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