Author: james Carter
At 5am this morning, Janet Yellen – Chairwoman of the US Federal Reserve – gave the world some significant insight into the timing of interest rate rises in the US – note interest rate rise, not cuts. As anticipated, the Fed dropped the word “patient” from its policy statement, opening the door for a rate rise in June. However she added two very strong qualifying statements to ease market’s fears that led to a 227-point (1.27%) rally from the DOW.
• The market roared from the opening bell today, the ASX200 closed 109 points higher (+1.9%) at 5951.• The banking sector rallied and outperformed the market, with 3 of the big 4 banks making fresh new highs as we had anticipated in recent reports. ANZ closed 2% higher at $36.63 after hitting all-time highs at $36.68, Commonwealth Bank (CBA) up 2.4% at $95.61 after hitting all-time highs at $95.80 and Westpac (WBC) up 2.7% at $39.71 after hitting all-time highs at $39.72.• A landmine was set this morning, Myer (MYR) closed 10.1% lower at $1.375 after reporting its 1H 2015 net profit, -23% on the year and below analysts’ estimates.• Fortescue Metals (FMG) rallied 6.7% at $1.99, outperforming its Iron Ore peers today.• The gold sector closed had a solid performance today, with Newcrest Mining (NCM) up 6.5% at $13.30.
A massive individual share move as the ASX200 ponders direction
• It was a choppy session today as investors sit on the sideline waiting for comments from the 2-day US FOMC meeting starting tonight.• The ASX 200 closed unchanged at 5842 after trading as low as 5788 at one stage.• The banking sector closed slightly mixed, with Westpac (WBC) outperforming the other ‘big 3’, ending 0.4% higher at $38.38.• BHP Billiton (BHP) closed 1.4% higher at $30.20, however slightly below the US close overnight.• Woolworths (WOW) closed well, down 67c at $28.67, note the dividend amount is 67c a share.• Orica (ORI) sold off, down 5.3% at $18.20 after its CEO announced he will be stepping down.• Fortescue Metals (FMG) closed 5.3% lower at $1.865 after scrapping its plans for a $2.5b refinancing bond sale. Subscribers received a live trading alert today with regards to FMG.
The “stars need to align” in order to witness a significant move at major turning points of a market. In the short term, I believe this is currently unfolding with a break towards 6200 likely over the coming days/weeks – see chart 1. Technically, I need to see a close over 5875 to have confirmation and importantly, a close stop under 5850, but the parts of my jigsaw puzzle are coming together. I have mentioned a few times recently that the resources sector will need to bounce in order to aid the banks and drag the ASX200 upwards towards 6200 and I now have trading buy signals from parts of this sector. Let’s look at some individual pieces of the puzzle:
• The ASX 200 rallied 44 points higher today at 5842 after trading as high as 5863 at lunch.• The banking sector contributed to much of today’s strength, with Alpha dog, Commonwealth Bank (CBA) ending 1.8% higher at $93.41 and the regional, Bank of Queensland (BOQ) up 2.3% at $14.43.• The Resources sector closed well, except Fortescue Metals (FMG) down 2% at $1.97 while BHP Billiton (BHP) edged 1.3% higher at $29.77.• The standout of today was Sirtex Medical (SRX) down 55.1% at $17.53 after announcing that it had reviewed one of its major clinical study in its cancer treatment and was unfortunately no able to meet its primary endpoint of the trial.• As mentioned recently, oil has reached our buy area and this was apparent with Woodside Petroleum (WPL) up 1.8% at $34.59 and Santos (STO) up 3% at $7.18.
I was at the gym early on Saturday morning, before coming into work when I started chatting to a friendly guy next to me. It turns out that literally this week, he has just sold his successful Barbers business after 20 years, to move into property sales and development. There is a saying in the stock market that when taxi drivers start talking about shares with you it’s time to sell up. I’m not saying for a moment that either property or shares are about to crash, but I do feel the “easy money has gone” and more prudent investing is required going forward to achieve healthy returns.The growing and very influential SMSF market has recently been pouring monies into Listed Investment Companies (LIC’s), creating a $28 billion industry. There has been a 23% increase in the number of LIC’s available to investors in 2014 alone, with a number of players considering listings in the future. Investing monies into a LIC removes the need to directly manage a portfolio, while importantly allowing access to healthy dividends. However, most LIC’s have enjoyed significant advances during the current bull market, hence I believe investors need a lot more thought than previously, prior to committing at current levels:
• The ASX 200 recouped much of its losses earlier in the session, ending the day 17 points lower at 5798 after trading as low as 5761.• The banking sector reversed earlier losses, with Commonwealth Bank (CBA) $0.47 higher at $91.79 a gain of $1.04 from its day’s low.• The resources sector closed mix, as iron ore stocks such as RIO Tinto (RIO) and Fortescue Metals (FMG) 0.7% higher at $57.70 and 0.5% at $2.01 respectively; while the weak oil/energy stocks ventured near our trading buy areas today. Oil Search (OSH) closed 3.8% lower at $7.59, Santos (STO) down 2% at $6.97 and Woodside Petroleum (WPL) down 2.2% at $33.99.• iiNet (IIN) rallied 4% higher at $8.84 after some major broker notes upgraded its price target after TPG Telecom’s (TPM) takeover offer. Meanwhile, the other ‘telco’s’ closed lower, with Telstra (TLS) down 1% at $6.14 and Vocus (VOC) down 2% at $6.00.
**TPG (TPM) bids for iiNet (IIN) for $8.60/share. Subscribers earlier this week received a live alert purchasing IIN ahead of trading ex-dividend**
• Profit taking was seen today, with the ASX 200 down 36 points at 5,815.• Subscribers would have receive a live alert in taking profit in our iiNet (IIN) this morning. IIN closed 24.8% higher at $8.50.• Fortescue Metals (FMG) outperformed the Iron Ore sector, ending 4.4% at $2.00. RIO closed 0.4% lower at $57.30• The banking sector retreated, with Commonwealth Bank (CBA) down 0.5% at $91.32 and Macquarie Group (MQG) down 1.6% at $75.39• Please watch out for the Hickman Report tomorrow.
Really bullish, there's more to go in the reflation rally
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