Author: james Carter
• The ASX200 played catch up today, rallying 104 points (+1.9%) and catching up on the global equity markets’ performance overnight.
• It was a pleasant day not witnessing a sea of red today, with the materials sector being the strongest link. BHP Billiton (BHP) closed 2.6% higher at $27.10 while Fortescue Metals (FMG) rallied 3.8% higher at $1.79. We currently hold FMG via call options as a TRADE ONLY.
• China remains to be in a volatile position, with the Shanghai Composite currently trading 1.2% lower at 3,924 and the China A-Listed stocks down 3.6% at 4,000.
• The overseas Indices are currently looking to take a breather and consolidate tonight, with the likelihood of losing some of yesterday’s gains.
How does the Insurance Sector look after Warren Buffet’s foray into IAG?
• The ASX200 repeated much of last Friday’s session, trading near its lows early in the session, as low as 5,451, only to rally by lunch as high as 5,543 and drift back below the red sea by 19 points at 5,473. It seems that risk will remain off the table until Greece responds to the Eurogroup’s demands no later than Wednesday.
• As expected, volatility remains and the trading range of the ASX 200 were close to 100. The banking sector led the choppy session today, as Commonwealth Bank (CBA) closed 61c lower at $85.18 after trading as low as $85.00 and as high as $86.83 today.
• Although Iron Ore is currently trading slightly higher in Asia, Fortescue (FMG) lost 5% at $1.725 and South32 (S32) down 4.2% at $1.705.
• China also contributed in today’s session, reporting its trade balance at US$46.54B, ~18% lower than analysts’ expectations. The China A-share index resumed its rally however, with ~26% of its ~1300 stocks on trading halt resuming trade today. The China A-Share futures index are currently trading 2.2% higher this afternoon and with the Peoples’ Bank of China (PBoC) providing liquidity to stabilise the market, a restore is in order and the market is ok for now.
**The S&P500 Futures is up ~1% this morning after reports of Greece agreeing to demands by its creditors this morning**
**Reports of Greece agreeing to demands by its creditors this morning**
• The ASX200 rallied higher this morning as expected, as high as 5,526 with the global macroeconomic theme dominating our local market. The rally was contributed by reports of Greece submitted its proposal to the Eurogroup, meeting most of their demands. Risk was reduced by the afternoon and before the weekend however, as volatility seems to be the new ‘norm’ and the ASX 200 closed only 21 points higher (+0.4%) at 5492.
• Meanwhile, closer to home, the China A-share futures is currently trading ~9% higher this afternoon, as short selling is now limited and some liquidity is being provided by its Government.
• The materials sector continue to bounce back from its recent lows, Fortescue Metals (FMG) rallied 1.7% higher at $1.81.5 – We currently hold FMG via call options yesterday as mentioned live to Subscribers.
• The Banking sector is starting to concern us, Commonwealth Bank (CBA) closed 0.2% higher at $85.79, While National Australia Bank lost 0.2% at $33.07.
The current 34% crash in the Chinese stock market (chart 1) has created waves of selling through other markets, as investors panic to raise cash – in China yesterday, aggressive selling was witnessed in everything from eggs to sugar and even pig food. Whether the selling is because people have to cover margin calls, or simply because of the belief that the share market correction will lead to problems for the Chinse economy, the result remains the same. The important thing to remember is the collateral damage of panic selling across all markets leads to excellent opportunities to purchase great stocks at good prices. Overnight, Iron Ore plunged over 10% to fresh 2015 lows, as we have been targeting. This should lead to Fortescue Metals (FMG) reaching our targeted buy trade area – see charts 2 & 3.
• I reiterate, it’s been a tiring week so far, the ASX 200 had a weak morning session, down as low as 5383(-86 points) , only to claw back its day’s losses and close 1 point higher at 5471.• With Iron Ore currently trading 6.2% higher in Asia, the sector outperformed the broader market. Fortescue Metals (FMG) rallied 6.6% higher at $1.785. Subscribers received a live trading alert when we purchased Fortescue (FMG) via call options. • A reversal in China’s market was seen today, rallying as its government began to help stabilise the panic selling situation. The Sydney Morning Herald online currently has a headline that was worth mentioning “Chinese steel is now cheaper than cabbage”. We now expect as consolidation to be witnessed in the Chinese Share market.
Over recent days, we have witnessed carnage in the commodities space, as perception increases that the current 28% decline in Chinese stocks will hinder their underlying economic growth. Overall, this makes little sense to us as Chinese stocks are still up 15% in 2015 and 69% over the last 12 months – the ASX200 would love that performance. Simply, commodities, and related currencies, are continuing with their bear markets of recent times. Overnight, Gold fell $US20, Iron Ore -5.1%, Copper -3.1%, the $A broke under 74c and Crude Oil was basically unchanged after being down over 3% at one stage. We do not think the related reource stocks have yet reached our trading buy areas, but the time is approaching fast.
• It’s been a tiring week so far, with the ASX 200 reversing all of yesterday’s gains and losing 112 points (-2%) at 5469.• Much of today’s weakness was due to global investors reducing their risk exposure, as China’s stock market continues to decline with Iron ore losing ~8% in Asian trade.• With China currently 6% lower, BHP Billiton (BHP) lost 3% to $25.43, South32 (S32) down 5% at $1.725, Fortescue Metals (FMG) -6.2% at $1.675 and Rio Tinto off 3.3% at $50.06.• The banks also contributed to the bloodshed witnessed in the broader market, Commonwealth Bank (CBA) lost 2.2% at $85.77 and National Australia Bank (NAB) down 2.6% at $33.33.• The Health Care sector was the stronger link and this was seen with Resmed (RMD) defying the weakness in the ASX200 today and rallied 2.6% to $7.60.
Really bullish, there's more to go in the reflation rally
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