Market Matters Afternoon Report Thursday 29th September 2016
Good Afternoon everyone
What Mattered Today
The market had a cracking day with energy stocks leading the charge after OPEC shocked markets by agreeing to a preliminary deal to cut oil production for the first time in 8-years. It was unexpected which led to a very big move in energy stocks over in the US (+4.3%) while energy stocks in Oz topped that and rallied +6.3%...
We had a range of +/- 45 points, a high of 5473, a low of 5426 and a close of 5471, up +59pts or 1.09%. Volume was only slightly below average in equities while the option market was busy given it was stock options expiry. Our view had been for the ASX200 to consolidate its recent gains around / above the pivotal 5400 area prior to continuing with its current advance; that played out today.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Energy stocks + the miners saw most buying today with Woodside (WPL), Origin (ORG), Santos (STO) and Oil Search (OSH) all putting on more than 7%. BHP and RIO chimed in adding +4.72% and +3.70% respectively.
We had a short term trading position in RIO via options (bull call spread) which we closed out today for a profit as it approached $52. Given the position was held through Options, we took the profit fairly quickly. For subscribers holding stock in RIO our medium-term target (as per the weekend report) would be at $55 – and clearly, we can be more relaxed holding stock (as opposed to options) in terms of timing.
Rio Tinto (RIO) Daily Chart
With regard to the Energy Stocks and the Crude price generally, the move by OPEC is a big one. Not so much in terms of the actual production cuts but more importantly, it signals their desire to see prices move higher. Clearly, OPEC has less influence than it once did however their decision overnight signals their clear intentions and Oil prices will likely move higher – just as they moved lower when they wanted to squeeze the US shale industry.
We have 10% of our portfolio in Origin Energy (ORG) which is a leveraged play on the Oil price.
Origin Energy (ORG) Daily Chart
The Aussie Dollar was strong early today hitting a three-week high and trading above the 77c mark. We covered the Aussie in the morning note looking at the correlation between the ASX 200 and the currency….A higher currency bodes well for the ASX .
Since the major top in the ASX200 (just under 6000) in 2015, the Australian stock market has followed the $A very closely. There is no reason to believe this strong correlation will not continue, hence we remain positive the ASX200, like US equities with a potential target of the 5700 area.
ASX200 v $A Weekly Chart
Sectors
ASX 200 Movers
Select Economic Data - Stuff that really Matters in Green
What Matters Overseas
FUTURES higher….
All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 29/09/2016. 5:00PM.
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