Market Matters Report / The Hickman Report - Saturday 19th October 2013

By Market Matters 19 October 13

The Hickman Report - Saturday 19th October 2013

Morning All, Last week we saw the ASX200 up 91 points week on week hitting highs of 5326 (last time was in July 2008!!) Likewise, after a small volatility in trading of the past two weeks, the Dow was up 163 points from the previous weeks’ close. This was due to the US agreeing to a deal and Obama signing the legislation to end the partial shutdown as well as lift the US debt ceiling on Thursday.

The Global Macro picture for the 4th quarter 2013 now seems to be positive all round, with the Russel and S&P last week hitting all-time highs.  And domestically we now see the fear of the US defaulting has subsided with the VIX down, and now we see the fear of missing out!

 

Domestically, banks are having a stellar run with investors chasing yield and resources picking up on good news by our Chinese peers as their GDP accelerated in the 3rd quarter, growing by 7.8%.

 

Still 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, we have seen a continuing theme of any sharp selloff in equities being bought aggressively.

 

 

Relevant current seasonal statistics:

 

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

2.    October is the last month of the “worst Six Months” for DOW and S&P

3.    A history of market crashes though can be seen in October.  Particularly in post-election years, though is fruitful  and proven to be an excellent buying opportunity.

 

 

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

 

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

 

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

 

 

continue to believe we see an 8-9% correction in the S&P after data is digested of the deal that lifted the US government shutdown and raise of US debt ceiling, but how far the ASX200 corrects, if at all, is much harder!

 

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 bullish here.

  • Cash, around 10%.

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 and / 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, with my target of a decent break reached 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. 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.



 

 

 

 

 

 

 

 

 

 

 

 

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 andintervention.



 

 

 

 

 

 

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.

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 96c, renewed weakness nowlooks likely with an ultimate target of 81-82c.



 

 

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 saw what happened there!!



 

 

 

 

Have a great week,

 

Kind regards,

Shawn Hickman


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