Author: james Carter
- A quiet session was experienced today in the ASX 200, as half of the states enjoyed their respective public holiday. The broader market closed 0.4% higher at 5,185, after trading as high as 5,214 earlier in the morning.
- The Telcos had a good run, particularly with Telstra (TLS) after reports of the joint venture with San Miguel ceased in the Philippines. TLS closed 2.3% higher at $5.28.
- The Energy names were the favour of the day, following on from Oil’s positive performance over the weekend. Santos (STO) closed 3.4% higher to $3.99, while diversified miner, BHP rallied 0.7% higher to $17.74.
- Flight Centre (FLT) rallied 2.3% higher to $44.84 after announcing to the market of its expansion in Europe, acquiring a Dutch corporate travel agency.
Best Sector – Telcos
Worst Sector – Utilities
Good morning everyone and I hope you all had a great weekend… Overview Last Monday we discussed the underperformance of the Healthcare Sector and this has continued as our overall market view has unfolded. The ASX200 gained 1.5% last week, led by the banks, while the Healthcare Sector struggled to be positive, finally gaining 0.3%. Our short term positive market stance has materialised and, not surprisingly, this counter trend advance has been led by the underperforming / heavily shorted stocks. Hence, recent positive sentiment has largely ignored the Healthcare Sector in turn creating some potential opportunities. The Healthcare Sector as a whole remains positive targeting fresh all-time highs BUT we would still advocate taking profit into this strength; so any buying is short term.
- Another dull day seen today, where the ASX200 started weak this morning, only to retrace back from its lows of 5118 at midday to close 16 points higher (+0.3%) at 5166.
- The lift in the broader Australia market was after the Peoples Bank of China lifted its daily yuan fix.
- Diversified Financials, Macquarie Group (MQG) rallied 2% higher to $66.95, outperforming the big 4 banks, with CBA ending its day 0.3% higher to $76.37.
- Qantas (QAN) finished the day 2.6% higher to $3.93, while Virgin Australia (VAH) closed 1.1% lower at $0.435.
* Please watch out for the weekend report tomorrow.
Three stocks we are watching carefully for different reasons
- A dull day seen with the ASX 200 today, with the broader market trading in a range from 5170 on the top of the range to close on the lower range of 5150 – Down 7 points, or -0.1%.
- Investors were clearly on the sideline today, waiting for the outcome of the European Central Bank’s meeting tonight.
- Big Four banks closed mixed, with CBA being the weakest link, ending its day down 0.2% to $76.14.
- The Silver Doughnut, Macquarie (MQG) lost 0.6% to $65.64, while Henderson Group (HGG) closed 1.9% lower to $4.69.
- The major Iron Ore names closed higher, RIO closed 1% higher at $44.73, while Fortescue Metals (FMG) closed unchanged at $2.71.
Best Sector –Consumer Discretionary
Worst Sector – Health Care
Good morning everyone Overview Market Matters are a market leading advisory service, to subscribe to their free newsletter click here Two macro events are unfolding this week that are likely to determine the medium term direction of equities. Firstly, this morning the Reserve Bank of New Zealand (RBNZ) cut interest rates from 2.5% to 2.25% when most economists were predicting no change. They have also stated that further cuts may be required to increase inflation / economic activity. As a result the Kiwi dollar has slumped. Of course our own RBA is likely to watch the results of market action over the coming weeks very closely as the $A rises (against their wishes)…..further rate cuts in Australia may still be a possibility. Market Matters are a market leading advisory service, to subscribe to their free newsletter click here Secondly, in less than 24 hours Mario Draghi is talking with virtually all economists expecting the ECB (European Central Bank) to cut rates; BUT European stocks have rarely responded positively to recent actions by the ECB. Nevertheless, the influence on global currencies is going to be fascinating to watch. 1 US equities US equities have enjoyed a strong 4 week (11%) rally but we believe some consolidation is now likely because the market has reached major technical resistance in the 2000 area. Our preferred scenario remains that US stocks advance to fresh all-time highs BUT a break by the S&P500 back under 1940 will turn us neutral / bearish i.e. 2.3% lower.
- The ASX 200 rallied 49 points higher (+1%) higher at 5157, ignoring the weakness in the resource sector and helped strongly with the big four banks.
- The Iron Ore names were the weakest link, Fortescue Metals (FMG) closed 2.9% lower at $2.71, off its lows of $2.55 earlier in the day. As mentioned to Subscribers, MarketMatters bought FMG today for a short term trading view.
- Of the big four banks, the strongest link, National Australia Bank (NAB) closed up $0.70 (+2.6%) at $27.55.
- We remain short term bullish with anticipation of good news from the ECB this week.
Best Sector –HealthCare
Worst Sector – Energy
Good morning everyone Overview Yesterday’s papers were full of the massive rally in Iron Ore and the local resource stocks opened with the anticipated surge. However, by market close the picture was almost ugly and people were quoting at nauseam “what goes up must go down” and “buy on rumour sell on fact”. One characteristic that has been holding true over the last year is that the press has been an excellent reverse indicator at panic tops and bottoms! Fortescue (FMG) had reversed 50c (15%) to be down 9.4% on the day with heavyweights BHP and RIO also closing in the red. Reiterating our view from yesterday, Market Matters has no interest in chasing these resource stocks as investments after their recent strong gains. However, for the very active investor / aggressive traders the story may be a little different. Market Matters could buy FMG ~$2.70 with stops under $2.55 targeting a retest of the $3.20 region. – see Chart 1 below Turning to the Markets We are currently slightly more comfortable with Iron Ore than Crude Oil and it was interesting to see the bulk commodity only down 0.2% after the extraordinary +18% rally the day before; conversely oil is down 4.4%. There are a number of reasons we would consider an active investment into FMG, including: 1. We remain positive the Emerging Markets Index looking for a further ~10% upside from current levels and this index has a large correlation with Australian resource stocks.- see chart 2 below.
- The ASX 200 had a healthy breather ending its session near its lows, down 34 points (-0.7%) to 5,108.
- The Big 4 Banks dragged – ANZ was the weakest link, down 2% to $24.98, while CBA closed 1.9% lower at $75.45.
- In the Iron Ore space, RIO lost 2.6% lower to $45.26, while the current wonder, Fortescue Metals (FMG) lost 9.4% to $2.79 after an M&A with Vale was announced this morning, with the focus of blending their Iron Ore and a potential sell down stake of up to 15% of FMG to Vale.
- Iron Ore in Asia closed limit up early in its session, up to the daily maximum percentage of 5.88%.
Good morning everyone Overview Last night Iron Ore rallied over 18% as the market digested China’s statement on the weekend that they would reinforce economic growth, combined with their statement of intent to cut nonperforming assets and that this may include high cost producers. This style of panic rally is a combination of both speculation and short covering of a deeply oversold market and investors should beware as they do have a tendency to be short lived. As we have said previously, it’s amazing how market sentiment can change so radically as “Fear & Greed” kicks in. Warren Buffett’s famous quote comes to mind: “We simply attempt to be fearful when others are greedy and to be greedy when others are fearful” – Warren Buffet. While Market Matters has missed the most recent spike from the resource stocks we would certainly NOT be contemplating buying at today’s levels. We remind subscribers that we are not lovers of investing in the resources space as these companies cannot determine their own profitability – we regard the sector as a trading arena. Remember Market Matters has been calling Iron Ore to break over $US60/tonne over recent months and now we are here we are swaying to a neutral / bearish stance.
Really bullish, there's more to go in the reflation rally
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