Author: james Carter
- An absolute rout is what best describes the ASX 200 index today. The market closed on its lows, down 195 points (3.8%) to 4918.
- Across the board selling caused one of the biggest falls we have seen since 24 August (- 4.1%). BHP Billiton (BHP) was down 6.7% to $21.61 whilst RIO Tinto (RIO) lost 4.6% to close $$46.52.
- The banking sector was hit hard with Australia New Zealand Bank (ANZ) down 3.7% to $26.38, National Australia Bank (NAB) down 3.6% to $29.20 and Westpac (WBC) down 3.8% to $29.10. Commonwealth Bank (CBA) was marginally better, down 3.5% to 70.15.
Best Sector – IT
Telco stocks trading individually NOT as a sectorGood morningOverviewJUST ANNOUNCED at 8am in the AFR, after 90% of this report was written, VOC and MTU set for $3bn merger!!! This should be very positive to both stocks due to cost savings and other synergies.Standing back from the above announcement, the market has treated the Australian Telco’s on a very individual basis compared to the banking sector that has basically moved as one large unit. Interestingly however, the negative standout in the Telco’s is Telstra and the way it has been treated very similarly to the out of favour banks / “yield play”; that said, November’s looming dividend is potentially adding some short term support.Importantly Vocus which Market Matters has been fan of over the year is only 10c below the technical target of fresh all-time highs for 2015. With this morning’s announcement we will be watching the price action with a view to taking profits and potentially switching to a better opportunity.Turning to the MarketsBelow is a simple snap shot of 5 Australia’s leading Telco’s:
- A surprising rebound in the ASX 200 today, rallying 71 points to the close, at 5,113.
- The banks surprised and rallied well today. Commonwealth Bank (CBA) closed 1.8% higher to $72.70.
- BHP Billiton (BHP) managed to swing back into positive territory, ending 1% higher to $23.15 after trading as low as $22.39.
- In the M&A section, we witnessed a disappointing performance from VOC (and MTU). Initially we thought the synergy and benefits of these companies would push the stocks higher, but it quickly became apparent that this was already priced in their share prices, hence our alert to switch from VOC to MQG earlier today.
Best Sector – IT
Focusing on CBA as market fluctuations continueGood morningOverviewMarket volatility continued last night with the Dow falling 263-points before recovering to close down a relatively small 78-points (0.5%). Last night’s price action again illustrated the ease with which stocks are still able to fall but also the buying that appears in periods of significant weakness.All eyes were focused on Janet Yellen at 7am looking for her to give any clues on the Feds direction for interest rates. After the recent turmoil caused by poor communication of her reasons around not raising rates a clearer message of her future intentions was anticipated. To many it came as no surprise when she stated the Fed still intended to raise rates in 2015 as the Fed attempts to both manage the economy and keep markets happy!So we remain firm in our view of the markets where we are looking for a further spike down to the 4900 area on the ASX200 for a strong buying opportunity… however, patience remains the mantra!Turning to the Markets
- The roller coaster hasn’t stopped, but it continues to follow the path that we have been predicting! The ASX 200 started the day up ~50 points, then started to slip and slide, to being ~ 60 points lower. All this was before lunch time! Well, the day finished with the index down 29 point (-0.6%) to 5,042.
- Janet Yellen’s speech this morning, certainly was the main cause of volatility, but it seems that the market can’t decide whether an expected rise in rates later this year will be good or bad.
- The banks were at the brunt of the selling. Commonwealth Bank (CBA) was hit the hardest, down 1.5% to $71.44.
- The miners were better as the day went on with BHP Billiton (BHP) finishing up just 8 cents to $22.93, whilst RIO Tinto (RIO) was stronger, up 65c to $48.95.
- Please watch out for the weekend report.
Best Sector – Consumer Discretionary
When the going gets tough the tough get going!!Good morningOverviewOur reports have had a common theme over recent weeks but stock markets generally only have 2-3 important inflexion points in a year so being prepared for when they occur is VITAL.Market Matters went negative the ASX200 back in April when the index was up over 5900; this included our controversial call to sell CBA over $95 – we are now looking to complete our repurchase of the bank close to $70. We sent out a “buy the market” alert literally within minutes of the low at 4928 on the 25th of August from where the market rallied 377 points (7.6%).We are not looking for a pat on the back because we did start buying stocks back around 5250, almost 5% early, but we have cash ready to aggressively buy if our next prediction is correct. Importantly to us we’re very focussed on ensuring our subscribers consider this next opportunity seriously. If we are correct there is a strong possibility of a final panic low in coming weeks that will be followed by a minimum 10% rally into Christmas – watch for alerts.We know it’s hard to get excited buying a market that’s receiving so much negative press, almost daily, but that’s just what investors generally should do! Investor psychology is a strange things and it is why the uninformed investor more often than not ends up buying at the top and selling at the low!!Turning to the Markets
- A pleasant day was experienced in the ASX 200 on this cloudy day in Sydney, ending the day 73 points higher (+0.5%) at 5,071.
- The Bank sector led the herd today, with the big 4 banks rallying 1.3%. ANZ closed at $27.34, CBA at $72.50, NAB at $30.20 and WBC at $30.36.
- Most of the Iron Ore sector had a breather from descending. BHP closed 0.2% higher to $22.85 and RIO up 0.7% to $48.30, while FMG lost 1.4% to $1.785.
- With risk still seen in the Australian market, gold stocks rallied as investors still seek the ‘safe havens’. Newcrest Mining (NCM) rallied 3.4% to $12.33 and Regis Resources (RRL) up 4% to $1.685.
Best Sector – Consumer Staples
Mining stocks dive, perhaps low interest rates are here for longer
- Investors returned to the Sea of Red today in the ASX 200, following the global performance overnight and accelerating further after bad data from China.
- The ASX 200 finished 105 points (-2.1%) lower to 4,998, as our brethren, China, reported a weaker than expected Flash Manufacturing PMI – a leading indicator of economic health.
- The commodity stocks fell, BHP Billiton (BHP) lost 4.4% to $22.80 and Fortescue Metals (FMG) down 5.5% to $1.81.
- Not even the banking sector could be shielded from today’s bloodbath; Westpac (WBC) closed 3.7% lower at $29.97.
Best Sector – Industrials
Believe, it or, not equities are actually gaining strength!Good morningOverviewWell, the volatility continues! With the Dow rallying 125 points last night it recorded its 18th day out of 23 of moves greater than 100 points, an amazing 78% of the time.The strength last night appeared to kick in when a member of the Fed made comments around a rate rise before the year is out; in other words, this equity market wants a rate rise for reassurance on the Fed’s opinion about the strength of the world’s economy.The current 6 year bull market is arguably the most unbelieved in history but there is rising pessimism about the substance of the global economic recovery fuelled by the weakness that has crept into opinion/fear courtesy of China. Yet this bull market has ignored a Japanese Tsunami, US debt downgrade, commodities’ crash, Europe, Greece and even Ebola! Hence will this Chinese wobble also be forgotten by 2016?Recently, the cost to protect portfolio’s from downside price movements has skyrocketed (VIX) and the bearishness amongst professionals is the greatest in 3 decades – see chart 1. This is all excellent news to the bulls like ourselves. On an historical basis, over the last 52 years the S&P500 has rallied on average of over 10% when newsletter writers were as pessimistic as they are now – data compiled by Bloomberg.On the futures market, bearish contracts outnumber bullish ones by the most in 3 years and speculators have increased their short positions to the most since March 2009! We have used the quote from Warren Buffett previously but it feels extremely opportune to include it again:”We simply attempt to be fearful when others are greedy and to be greedy when others are fearful.” – they are fearful now!Turning to the MarketsThis is how we see things:
Really bullish, there's more to go in the reflation rally
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