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Month: April 2016

Market Matters Afternoon Report Friday 8th April 2016

by james Carter

Market Matters Morning Report Friday 8th April 2016

by james Carter

Risk v Reward Good Morning everyone U.S Markets were sold off overnight; -174pts on the DOW and the S&P fell -1.20%. It’s not a huge drop, but it’s interesting to think it’s the biggest one day decline since Feb 23. Cleary the market has been in bullish mode – and the rally has been strong and unrelenting. That said, we now see an imbalance between the potential risk of a market fall v the potential reward of further upside. We’re constantly looking at markets, stocks, sectors etc on the basis of risk v reward. Make an assessment of the potential upside v the potential downside for a given period. The potential reward should be a multiples of the risks. Right now, we see limited upside in U.S stocks and elevated risks of a downside move, primarily because of the recent market rally, and the upcoming Q3 earnings reports in the States – which start next week. That doesn’t mean the market can’t go higher, and we’ll be deemed wrong if it does, it simply means it’s prudent, sensible whatever else you want to call it to increase cash in such an environment. Not a lot of new information to ponder this morning, so a reasonably short report… Here’s the moves in the U.S overnight by sector – the defensive sectors seeing most money …and the S&P 500 – seems to be topping out. The questions remains whether we’ll get one more blow off top before it rolls over or we’ve now started the pullback. ….and the Volatility Index – which has been extremely low. Buying Put Options has been very cheap due to low volatility Summary

Market Matters Afternoon Report Thursday 7th April 2016

by james Carter

Market Matters Morning Report Thursday 7th April 2016

by james Carter

Short selling at record highs in the U.S Good Morning everyone Overview U.S Markets were up overnight, +112pts on the DOW, and +1.05% on the S&P 500. Futures here are tipping an + 18pt rally which comes on the back of a +21pt move higher yesterday – the ASX 200 now sits at 4945. The U.S market still looks strong – that’s fairly obvious to see. At Market Matters, we think there are obvious risks over the next month or so around U.S reporting as we’ve detailed recently. One of the other obvious trends in the U.S is the magnitude of short interest in stocks. Recent reports suggest that short interest is around $1 trillion – and is now at the highest level since (pre-GFC). More than 4.3% of the S&P is currently short sold. This is actually a bullish short term sign and may be one reason why the U.S has stayed very resilient in the face of obvious headwinds. If there are significant amount of shorts outstanding – and they’ve been increasing over time, it means a couple of things;

Market Matters Morning Report Wednesday 6th April 2016

by james Carter

Reinforcing our current views Good Morning everyone Overview Firstly, we’d like to set out once again our current views on the market, the reasons why we should cautious, our decision to move to 39% cash in the Market Matters portfolio, and the likely path over the next month or so. We’ll also cover the rationale for the two share sales yesterday. Current positioning In recent weeks we were calling for the US market to make a new high – about 5% above where it was trading at the time and for that to support a move in the ASX 200 up to 5250/5300. We got to 5216 on the ASX 200 and felt the upside had become limited so we put ourselves into ‘sell mode’, increasing cash levels in the Market Matters portfolio. The Aussie market started to pull back from that time as concern around bad debts in the banking sector emerged. With banks such a large influence on our index, the market started to underperform pretty dramatically v the US market which continued to be well supported. That support however – as we flagged in our March 22nd report – is largely coming from the companies themselves that have large buy-back programs under way. Companies using cash to buy back their own stock on market. They then cancel the shares, which results in a smaller number of shares on issue, and they ultimately see an improvement in their earnings per share (EPS). It’s a way of manufacturing growth.
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Market Matters Afternoon Report Wednesday 6th April 2016

by james Carter

Market Matters Morning Report Tuesday 5th April 2016

by james Carter

All eyes on the RBA at 2.30pm Good Morning everyone Overview A fairly quiet night overseas and our FUTURES are up just +2pts…so a tepid open is expected with most waiting around the RBA decision at 2.30pm this afternoon. Obviously no change is expected, however as we wrote yesterday, language around the level of the currency will be the most watched part of the statement. If Glenn Stevens comments about the AUD being too high relative to prevailing economic conditions expect a sharp sell-off in the currency – although we doubt that will happen. Key level for ASX 200

Market Matters Afternoon Report Tuesday 5th April 2016

by james Carter

Market Matters Morning Report Monday 4th April 2016

by james Carter

What now for the Aussie Dollar? Good Morning everyone Overview We’ve called the Aussie Dollar higher from significantly lower levels as the US pushed back on rate hike expectations and the overheated – overcrowded – long US Dollar trade took some time to unwind. We targeted the 75c range from under 70c and we’ve now punched through that level to trade at 76.72c. Clearly, after such a big rally, it gets more difficult to predict the next likely move – however – we’re in the business of having a view – and presenting it – so, here it is… Factors driving the currency – Firstly, the AUD is a small cork in a global ocean of currency flows and its moves are dictated by global macro factors as much as the strength or otherwise of our local economy and interest rate settings (& rhetoric of our central bank). – The USD rallied more than 12% versus the Aussie in 2015 and from the start of 2014 the USD has rallied more than 23% v the AUD. Obviously the USD has rallied strongly against many major currencies and to track that, we look at the US Dollar Index. The U.S. Dollar Index measures of the value of the U.S.
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Market Matters Afternoon Report Monday 4th April 2016

by james Carter

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