Technicals | Aug 21 2012
By Michael Gable
In the last week we have seen a some cash move from bonds back into equities. This is a good sign for equity markets, but once again the volumes are low and the buying has been in defensive/high yielding stocks, not cyclicals. With holidays in the northern hemisphere coming to a close, European debt issues will come into focus again over the next few weeks. It appears as though Germany is resisting plans by the ECB to buy Spanish and Italian bonds, and we have the Greek Prime Minister Antonis Samaras meeting his German counterpart in Berlin this Friday. It will therefore be interesting to see whether the market uses these events to start taking some money off the table, given the decent rally that has occurred over the last several weeks.
In hindsight, with the market having done better than expected over the last several weeks, it is easy for investors to get sucked in to buy up at these levels. But macro events from June/July were a bit of a minefield, and August saw reporting season kick off in Australia. We have a third of companies reporting this week, but there has been a notable trend already towards cautious forward statements. It is easy to say now that being aggressively long the market would have been beneficial, but the environment was risky. For those stocks that have had a good run, I am still happy to wait for cheaper levels.
Having said that, there are some other quality companies that are still providing good value at this point in time. I highlighted QBE ((QBE)) last week as a company that will get to
cheaper levels, and last Friday’s annual result was the catalyst for that. So these are the right levels to get involved with QBE if you have a medium to longer term horizon. I have also noted in this week’s report that Cochlear ((COH)) appears to be a good buy around these levels, with CSL ((CSL)) possibly presenting a buying opportunity in coming weeks.
The ASX 200 ((XJO)) has initially found resistance where it gapped down in early May. Given the strength of the last few weeks, we may even see a retest of the May high up towards 4450. However, given that the rally is corrective and volumes are light, we still have a good probability of retesting the June low at some point, with a target at 3800. September and October are generally negative for the markets, but considering that we’ve had a number of false signals during August, I will refrain from giving a time frame for when the market may attempt a pullback.
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Visit Michael Gable's website at www.michaelgable.com.au/.
After leaving Macquarie Bank's Securities Group in 2008 after many years of service, Michael has gained a highly regarded reputation in the financial services industry. As a Private Client Adviser with Novus Capital, Michael has become a popular live commentator and analyst for Sky News Business Channel’s “Your Money, Your Call” program. He is also the author of the weekly stock market report “The Dynamic Investor”.
Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management.
Michael deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.
Michael is RG146 Accredited and holds the following formal qualifications:
• Bachelor of Engineering, Hons. (University of Sydney)
• Bachelor of Commerce (University of Sydney)
• Diploma of Mortgage Lending (Finsia)
• Diploma of Financial Services [Financial Planning] (Finsia)
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2
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