Has the canary finally croaked?
What Mattered Today
A quiet session to end the week, with the ASX 200 chopping around the gain line before a reasonable rally into the close saw it end marginally higher. The range today was +/-28 points, a high of 5,366 and a low of 5,338 – with a close at 5359 – up +20pts or +0.39%. For the week, the index was marginally lower, down 0.3%, with a range of +/- 80 points – so reasonably tight. Turnover was ~20% below the 20 day average today so it seemed most were enjoying the sunshine in Sydney…
Recapping some of our thoughts over the past week, we went negative the commodity space early on using Whitehaven Coal (WHC) as the ‘canary in the coal mine’, while we also dipped out toe into some of the ‘unloved’ defensive yield names that have been hit hard in recent months – putting some money in some unloved stocks - plus we had a crack at the ‘higher $US story’ by adding two other stocks that have been performing nicely. A bank was trimmed to make room while our cash now sits at below 10%. We re-capped our views on our holdings this morning, however a couple of charts are worthwhile reviewing….
1. The canary has croaked…..Whitehaven lead the rally in the commodity space from the Jan/Feb lows but has now started to roll over – down another 25c (8.93%) today. It looks bearish on the charts + insiders have sold some + it failed to rally even when coal prices moved higher….We think the canary has croaked short term and we’re now cautious commodities from here.
Whitehaven Coal (WHC) Daily Chart
RIO the next to roll over??
Rio Tinto (RIO) Daily Chart
2. The $US has rallied this week – pretty strongly when we look at the daily chart on expectations for FED hike in December. It’s a done deal it would seem and another two hikes are now getting priced in to the market for 2017…A higher $US is obviously negative for commodities – BUT it’s positive for US earners and we added three of them to the portfolio this week…
US Dollar Index (DXY) Daily Chart
Westfield has a good session today on the back of some very bullish broker commentary – the stocks put on +3.35% to close at $8.94– according to Credit Suisse they reckon “WFD pricing in complete development shutdown and more. Assuming spot FX & flat cap rates, we estimate WFD could shut down its entire development business in Dec-17, incur the associated costs, pay a special dividend of A$0.20ps+ to investors & still be worth more than the current share price. In absolute terms, WFD’s current pricing falls well short of its intrinsic value. In relative terms – when benchmarked against Groups that have far less capacity to add value – it is even more difficult to justify” (Source Credit Suisse).
Westfield Corp (WFD) Daily Chart
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Sectors
ASX 200 Movers
Select Economic Data - Stuff that really Matters in Green
What Matters Overseas
FUTURES mixed….
Have a great Weekend – and watch out for MM report on Sunday.
The Market Matters Team
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