Market Matters Report / The Hickman Report - Saturday 2nd November 2013‏

By Market Matters 02 November 13

The Hickman Report - Saturday 2nd November 2013‏

After a quiet week where markets generally consolidated, or made slight gains I am hearing people still say "hey cannot buy here"...remember the herd is usually wrong. The below statistics are very clear which should not inhibit traders / investors from pulling the trigger on hard decisions as opposed to the easy trade of "take profit after the big run"

Hi All,  


What Matters:

 

After a quiet week where markets generally consolidated, or made slight gains I am hearing people still say “they cannot buy here:”…remember the herd is usually wrong. The below statistics are very clear which should not inhibit traders / investors from pulling the trigger on hard decisions as opposed to the easy trade of “take profit after the big run”.

 

  • November begins historically the best 6 months for the US markets – with small caps kicking in.
  • Also, November begins historically the best 3 months for the US markets.
  • The 6 month period has averaged a gain of 7.1% since 1950.
  • The S&P’s rally in October is a very bullish indicator into 2014.

 

 

When you read the above it should be a lot easier to buy than sell – apart from Gold stocks! November usually simply rallies due to institutional cash flows plus they half an eye a good annual returns where possible.

 

Investor sentiment suggests that bears are disappearing for a simple reason. It has been more than two years since the last time that either the Dow, or S&P 500, corrected at least 10%.  Simply the Fed is supporting all asset prices with Tapering. This includes stocks, bonds, housing and virtually everything that has a price tag on it. So until the Fed backs away from QE and its stated 2% inflation target / unemployment goal and the geopolitical front remains relatively quiet, the most likely direction

for the market is higher with an occasional bump. Remember, overbought conditions can exist for quite a long period without problems arising.

 

So I am likely to remain overweight equities into the first ¼ of 2014.

 

Last week saw a number of large stocks report with the net result clearly positive – ANZ, MQG & DJS. The story remains the same, too many people are hoping to buy around 5200 so it won’t get there……valuations are not too exciting here but this rally remains $$ / yield driven with earnings revisions potentially also around the corner. Retail investors will not exit the yield play any time soon but institutions are likely to start switching in early 2014 looking for growth.

 

A 2.58% rally in Iron Ore on Friday to 135.30 should catch a number of analysts eye on Monday as the Bloomberg Consensus price of 102 for first quarter 2014 is looking very shaky!!

 

I personally believe the next move in rates remains up which supports the above.

 

An article in the AFR last week, indicated major banks will be required to hold 8%-8.5% CET1 capital. Given this is where the banks already are this not a drama.  However, a lot of analysts were looking for a special dividend from Westpac…..it will be interesting to see how Gail Kelly plays this.

 

 

Relevant current seasonal statistics:

 

  • November begins historically the best 6 months for the US markets – with small caps kicking in.
  • Also, November begins historically the best 3 months for the US markets.
  • The 6 month period has averaged a gain of 7.1% since 1950.


Hickman's thoughts on Stocks, Sectors & Indices

d = daily view

w = weekly view

m = monthly view

Bullish:   ANZ (w), ASX200 (d) (w) & (m), Banks (m), BEN & BOQ (w), Dow (w), FOX (m), FTSE (w), Hang Seng (w), IBEX (m), MQG (w), NAB (w), NASDAQ (d) & (w), QBE (m), S&P (d) & (w), SUN (m), WBC (d), WES (m) & WOW (m).

 

Neutral:   AMP (w), BHP (d) & (w), CSL (m), Nikkei (m) , NZ (m), RIO (d) & (w), SEK (w), STOXX (w), & WBC (w).

 

Bearish:    China (w), Copper (m), Gold (w), NCM (m).

 

 

 

The ASX200 is looking strong at present as it feels like some major players have been caught underweight.

 

  • This week I would buy on Monday, 1/2 size, around 5405 basis Dec. SPI looking for a fresh 2014 high.

 

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, under 15%.

 

I will be switching NAB to ANZ / CBA next Thursday when ex-dividend.

 

I am a happy buyer of FOX into weakness and Gold stocks if the fall to fresh 2013 lows. Also, I remain 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, as we are in a seasonal bullish phase and most people were too afraid to buy closer to 5000 because of media coverage surrounding the US debt default situation – now fear of missing out is emerging. Currently every retracement soon reaches hungry buyers. The yearly range targets 5450 and a simple monthly abc targets 5670. 














American Equities

 

The American indices look set to rally into Christmas with the Dow targeting over 16,000.













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 with a stop under 6275. 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. but this is a common view so time to move on.









Asian Indices

 

Asian indices are gaining clarity and becoming positive. The Nikkei has been 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, the risk of rising bond yields took the tarnish off this space but it has returned with a vengeance; I am now recommending a more balanced portfolio – my view is that the next move in rates is up! Overall the major stock’s in the ASX200 remain clearly positive and I remain a net buyer.


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 97c, renewed weakness now looks 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 remain 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! Having recently visited China, the only two investments that interest locals are property and Gold….

 

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







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



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