Because of the chaos and indecision in Canberra, the S&P/ASX 200 Index finished…….up for the day and week, although in after hours trade, the market has given back a lot of today’s gains in preparation for a likely flat night tonight on overseas equity markets.
The Aussie market gained nearly half a percent or 20 points and broke over the 4300 point barrier for the first time since early December to 4306 points:
We’ve been here before (late October, mid November 2011) the main difference being the market has breached, on a weekly basis, the 200 day moving average has crept above the 4300-4900 trading zone that I identified last year:
However, as I’ve mentioned before, do not count your chickens before Friday night, and my core thesis – a breakout from CBA and BHP – has not yet been satisfied.
On to other Asian markets, with Japan’s Nikkei 225 up 0.5% to 9647, building on its inverse head and shoulders breakout and looking a bit bubblicious for now. The volatile Hang Seng is currently flat at 21407 points with the Shanghai Composite up over 1% to 2440 points and continuing its breakout from its long term downtrend channel:
The AUD not only remained resilient through the Grand Space Opera unfolding, but jumped over 1 cent – probably on remarks by Captain Steven (where was your coverage of that today Mainstream Media?) that interest rates are to stay put for the time being. The commodity proxy/speculators delight is currently trading at 1.073 against the US Dollar.
Movers and Shakers
A mainly green board with consumer stocks piling on the gains, the laggard this time utility stocks as earnings season continues (and explains why this TD post is a bit late – apologies!)
Checking out the ASX8 (the top four banks and miners), ANZ gained over 0.5% breaking out resistance above $22 per share on the daily charts. As I said recently, it needs to close above this level at the end of the week to get to the next target at circa $25 per share. With today’s downgrade by Fitch putting the other 3 in line, this might be the relative bullishness it needs:
The big brother of banks, the Commonwealth (CBA) again finished flat for the day, as National Australia Bank (NAB) was up over 1%, continuing to go sideways whilst Westpac (WBC) was up 0.5%, clawing back yesterday’s losses also still technically in a sideways funk like NAB.
To the holes, where BHP Billiton (BHP) was up nearly 1% for the day but still going sideways in the medium term, stuck in a trading range with a potential bottom at $34 a share. Without a big rise in the Big Australian don’t count on the broader market moving anytime yet.
Its “twin” Rio Tinto (RIO), was also up nearly 1% and also remains in a trading range after trying to break free of its bearish downward bias, with resistance at $70 per share and support at $59 a share.
Gold miner Newcrest Mining (NCM) was sold off suddenly today on news its Lihir project has some problems – down well over 4%, but still technically in an uptrend, having risen almost 20% since the Xmas low.
To finish out the ASX8, Woodside Petroleum (WPL) slipped about half a percent after going a bit bubblish lately, probably going to retrace a bit but still follow the oil trend?
As I said at the top of the post, the overnight futures for the ASX200 are down around 20 points alongside mixed US and Euro equity futures.
Yeah ,thought I’d be the first to Congratulate you GB on final reaching you’re 4300 call..well-done .I’m sorry about borrowing you’re bear suit and pushing you’re shopping over..hope this makes up..
Cheers JR
http://www.youtube.com/watch?v=O0V_L3WRR-U&NR=1&feature=endscreen
gold.
well, thats another new closing high for the year with the market now above key 4300 resistance on a daily and weekly basis. This sees the 2nd best buying opportunity in a generation come to an end. the 1st best was early 2009 after the market crashed but that only lasted for weeks to months so you had to be quick. this time, when many large cap stocks were acually cheaper in late 2011 than they ever were in early 2009, actually lasted for an unbeleivable 5 months. meaning everyone from everywhere has had plenty of time to fill their boots.
its been a great battle this one between bulls and bears over the last 6 months. one of the most hard fought and entertainig battles ive ever seen. but its now time for the bears to admit they were wrong and concede defeat. an outcome the fundamentals always pointed to.
hope you invested wisely and made the most of the bargain stocks because that window of opportunity has now closed.
exactly which of the asx8 were cheaper in late 2011 than they were were from around oct 2008 to around march 2009. because i dont see a single one? WOW is the only one that was around the same, the rest were much cheaper during the lehman event? am i wrong here?
i think we have different ideas of what “cheaper” really means. its more than just the share price which is propably what youve looked at. heres an example, can FMG at $4 per share be “cheaper” than it was when it was $3 per share? yes it can depending on the balance sheet.
its what makes up the valuation behind the share prices that matters, not the share price itself. despite not hitting new share price lows many large cap industrial stocks were “cheaper” on valuation than they were after the market crashed in early 09. that is a fact. and its becuase they were still carrying the debt back then. this time they arent carrying the debt which is why they wouldnt go further down despite how bad sentiment got and are all now going up and have been for months. fundamentals and valuation matter more than anything else yet people pay the least attention to them?
FMG is a bad example. its not large cap for a start which is what i am referring to. in fact i reckon its a pig to be honest. and i wouldnt touch. why bother when you can own RIO, BHP or Vale with long life tier 1 assets. of the ASX8 i reckon exclude banks as they are shite, the remaining 4 debt/equity ratios arent too different. i would have to review, but again WOW is the only one that is compelling at this point in time. and i was buying lots of BHP in 08. sold the lot in feb 2010. my circle of competence is small though. minerals, energy and consumer staples really with some international tech stocks.
FMG is not a large cap? did i hear that right? capped at 16.8 billion its not a large cap? WOW over FMG??? good night EW
i will take WOW over FMG any day. i am pretty sure any value investor on earth would including prince. FMG is currently a mid cap and is not part of the ASX8. which is what we were talking about. okay, lets start with debt/equity because again thats what i thought we were talking about.
1. both FMG and WOW can pay total net liabilities with 5-7 years of net profit. this is okay at first glance until you realise that FMG profitably is at 1 in 200 year highs. WOW on the other hand plods along nicely growing incrementally like all good companies do.
2. yield. not even going there as no comparison. whats FMG dividend GB??
3. P/E. i would argue all companies p/E is expensive including WOW. we are in 1 in 100 year financial event so historic p/e averages are not relevant. FMG appears low but that is because we are in a 1 in 200 year commodity bubble. that said its the best p/E in ten years to buy WOW. when commodities burst and i would say they are bursting before our eyes FMG will be struggling. when iron ore returns to its long term price of around 30-40/tonne (AUD) dont be surprised if FMG goes belly up. (can anyone tell me what their unit costs are??) i am pretty sure its around 45/tonne which means long term price average makes them not viable. yes…not viable!!
4. FMG mines more marginal ore and is 4th largest iron ore miner. as i said before i would take RIO, BHP or Vale over FMG any day. see point 3.
5. although both kloppers and albanese appear prone to pay too much for assets neither has been found to have mislead market and shareholders this is not the case for forest.
sometimes i dont know why i respond to you but good morning GB!
ps. try and play the ball not the man GB. your hubris is very tiresome. a 23 year old graduate can be taught to trade anomalous investors who outperform the index for decades dont come along that often.
pps. 1 year returns WOW v FMG
WOW = -1.9%
FMG = -17%
im done now.
JR. thanks for support mate, but not necessary. onya.
Some nice analysis EW. Impressive. Thanks for taking the time.
Unit costs reported by fmg were more than $50, announced last week I think. Higher strip ratios were to blame, meaning their not going back down again (low hanging fruit taken)
interesting jackson. i knew it was high. but thats totally unsustainable.
Full announcement at http://www.fmgl.com.au/UserDir/AsxAnnouncement/HY2012%20Results%20and%20Appendix%204D630.pdf
Note a 44% increase in ore mined, 86% increase in overburden removed, strip ratio gone from 3.3 to 4.4
No doubt the bulls had retreated to cash as the market kissed 7K
If the bulls really come out to play then 2012 should be a doozy as the structural problems haven’t gone anywhere and its as good a bet that it’s 2011 all over again. There’s time a plenty…
“On to other Asian markets, with Japan’s Nikkei 225 up 0.5% to 9647, building on its inverse head and shoulders breakout and looking a bit bubblicious for now.’
Bubbly at 9647. Now 22 years, 1 month and 27 days since 29 Dec 1989 when it hit 38957. Its a BOTTOM!
Timeliness Veloci – I said for “now” maybe I should have said in the short term. I’ve studied the Nikkei 225 EXTENSIVELY for obvious macro and trading purposes…
and? all poo? i have tried hard to find value in nikkei. the only companies i like 6954, 7267 and 7309 are all expensive. so i just sit and wait patiently.
Energywonk,
I thought you might have touched on the oil and gas sector, given its one of your preferred sectors. This mid cap space has been amazing over the last 6 months. I’ve never seen so many stocks in one sector have such a run, dte,sxy,nse,wcl,bru etc etc.
Big guys being short gas i suppose helps.
agreed. but we were going tit for tat on the above. i reckon oz has some of finest mid cap o&g in world actually. great talent and high quality resource(s). sxy is particularly interesting considering its history and cornerstones. dte too. all this with a PRRT for last 25 years. when it comes to energy i mostly invest at home for these reasons. mostly again i stick to mid-large caps. i think your right about WPL being short gas-for now. ORG is very comfortable (with optionality) and BHP now okay with petrohawk (although it paid a price) and its continued push into deepwater. many of the small and mid caps are questionable though. lots more consolidation to come in CSG and emerging shale. if you are in it for long haul be careful, as many are flipping leases the way aussies have been flipping houses!
what i mean is. not all unconventionals are created equal. so depending on whether you want to see the company grow into legitimate player or just speculate on takeovers. i cant believe oil price actually considering how much unconventionals have changed the game since 07 or so.
I don’t get this either – at some point gas-to-liquid tech has got to become competitive with oil, maybe just not yet. Plenty of investment in small-scale GTL to put next to CSG/shale wells?
yes i am fairly sure over 20-30 year period most hydrocarbons will be reasonably fungible. i am not convinced the age of cheap energy is over.
Energywonk, what do you like?
Il find the sector very very hard.
Limited coverage, event driven and a lot of gas
i am probably a top down high quality data analysis person. i dont think you will go wrong over long term here if you stick to that. so i cant spruik particular companies. im very simple: best assets/deeply discounted. i dont think any of the big guys are that right now. so i am not doing much and focussed on other things.
Would Mel/bru fit that brief?
what’s your view on csg, I’m assuming you think all ok given most deposits reasonably shallow.
Sto looks like a sitting duck I think.