The Scorecard from Friday / The Past Week Markets A much more stable week on global markets saw markets add to the gains which began the previous week. The VIX, a measure of overall market volatility, declined by 21.5 percent for the week, indicating the return of more stablility. Reasonable economic data out of the US improved sentiment. Core retail sales data in the US out last Friday night came in much better than expected with an increase of 0.6% versus the expected 0.2%.
XJO 4,205.6 points, -38.9 points, Down 0.9% / +42.7 points, Up 1.0% DJIA 11,644.5 points, +166.4 points, Up 1.5% / +541.4 points, Up 4.9% SPX 1224.6 points, +20.9 Points, Up 1.7% / +69.1 points, Up 6.0% NASDAQ 2,667.9, +47.6 points, Up 1.8% / +188.5 points, Up 7.6% FTSE 5,466.4 points, +63.0 points, Up 1.2% / +163.0 points, Up 3.1% DAX 5,967.2 points, +52.4 points, Up 0.9% / +291.5 points, Up 5.1% Hang Seng HSI 18,501.8 points +256.0 points, Up 1.4% / +794.8 points, Up 4.5% Nikkei 8,748.0 points +75.3 points, Up 0.9% / +142.4 points, Up 1.7% Shanghai 2,431.4 points -7.4 points, Down 0.3% / +72.2 points, Up 3.1%
AUD/USD 1.0340 +0.0188, Up 1.9% / +0.0570, Up 5.8%
Key Commodities Gold +$15.20 to $1,680.80, Up 0.9% / +$42.50, Up 2.6% Silver +$0.45 to $32.22, Up 1.4% / +$1.06, Up 3.4% Oil USD +$3.03 to $87.30, Up 3.6% / +$4.59, Up 5.5% Copper USD +$0.0989/lb to $3.4140, Up 3.0% / +$0.1457, Up 4.4%
Market Direction XJO: The Australian market underperformed relative to international markets last week. Perhaps this was more related to the fact that our market was one of the first to move off the recent lows. In the near term a move to 4,300 looks likely however short term indicators are approaching overbought levels so a pull back is quite possible soon. The weekly chart is looking quite bullish with the MACD set to cross up and the slow stochastic rising in a channel. This chart also supports a move to 4,300 points before a retrace.
US Dollar The sharp rally in the US dollar appears to be over with the USD index falling by 2.8% over the past week. I noticed that volumes have been declining during the recent fall so I won’t be surprised if we see a bounce at some stage in the near future potentially forming a lower high for the currency.
Market Direction DJIA: An exceptionally strong week for the DJIA has resulted in the market approaching overbought status on the daily chart. The direction for the week ahead is likely to be driven by quarterly reporting by many majors as well as the beige book assessment of the state of the US economy. In the short term I am not expecting much more upside until the European debt crisis is resolved and more positive economic data comes out to allay fears about the potential for a double dip recession.
Economic Data: Key data to look out for this week includes Chinese GDP on Tuesday, the Beige book report on the US economy and UK retail sales on Thursday and the Philly Fed Manufacturing Index on Friday.
AUD Monetary Policy Meeting Minutes - Tuesday 11:30am CNY CPI q/y - Tuesday 1:00pm GBP CPI y/y - Tuesday 7:30pm EUR German ZEW Economic Sentiment - Tuesday 8:00pm USD PPI m/m - Tuesday 11:30pm USD TIC Long-Term Purchases - Wednesday 12:00am USD Fed Chairman Speaks “The Effects of the Great Recession on Central Bank Doctrine and Practice” - Wednesday 4:15am GBP MPC Meeting Minutes - Wednesday 7:30pm USD Building Permits - Wednesday 11:30pm USD Core CPI m/m - Wednesday 11:30pm USD Beige Book - Thursday GBP Retail Sales m/m - Thursday 7:30pm USD Unemployment Claims - Thursday 11:30pm USD Existing Home Sales - Friday 1:00am USD Philly Fed Manufacturing Index - Friday 1:00am EUR German Ifo Business Climate - Friday 7:00pm GBP Public Sector Net Borrowing - Friday 7:30pm
Company Reporting Season: Earnings season is well and truly underway this week with many major companies reporting including 11 DOW components: IBM, Bank of America, Coca Cola, Intel, Johnson & Johnson, American Express, Travelers, AT&T, Microsoft, GE, Verizon. Together these companies represent 36.4% of the DJIA.
Monday: Citigroup Inc, IBM Corp, Wells Fargo & Co Tuesday: Apple Inc, Bank of America Corp, Canon Electronics, Coca Cola Company, Goldman Sachs Group, Harley Davidson Group, Intel Corp, Johnson & Johnson, Yahoo! Inc . Wednesday: American Express Co, British Sky Broadcasting Group PLC, EBay Inc, Morgan Stanley, Ten Network Holdings Ltd, Travelers Companies Inc Thursday: AT&T Inc, Microsoft Corp, Philip Morris International Inc, Friday: General Electric Co, Honeywell International Inc, Verizon Communications Inc Saturday Sunday
Stocks To Watch
Cardia Bioplastics: CNN/CNNOA Cardia Bioplastics continues to remain on my list because of its strong finish last Friday where significant sized buy orders pushed the price up to 1.2 cents before a 150K sale saw the stock sold down to 1.1 cents. As previously mentioned CNN appears to be on the verge of a substantial increase in sales for their range of biodegradable and low carbon footprint packaging. Sales for the FY2012 are expected to be at least triple that of 2011. The company's primary activity is the manufacture and supply of resins which can be used by manufacturers of packaging to produce more environmentally friendly packaging products. The company’s manufacturing plant, which is located in Nanjing, China, is currently undergoing an upgrade in capacity to 12,000 tonnes per annum. There is also a JV in Malaysia where CNN’s 51% partner is investing A$5m building a new plant to produce biodegradable plastic bags. CNN is free carried on this investment and will supply resin to the new manufacturing facility. The company has some truly global brand names aligned with or as direct customers including Nestle, Kimberly Clark (owners of brands such as Huggies and Snugglers), Colgate Palmolive, KFC, McDonalds Japan, and the list goes on. I am hopeful of significant sales announcements with some owners of global brand names in the near term which should lead to a major re-rate for the company. News Due: Further updates on increased sales including possible contracts with major global brands. Price Target: The stock has formed a cup and hande pattern with a breakout point of 1.4 cents giving a target of 2.2 cents. If the pattern is going to play out the right hand side of the handle should form this week to be followed by the breakout. Disclosure: Holding CNN/CNNOA
Redstone Resources: RDS The company put out a very good announcement on the 22nd of September which was somewhat lost in the large selloff which occurred that day. Recent RC drilling at the Company’s Tollu copper nickel project has intersected copper sulphide mineralisation over widths of 27, 20 and 17 metres in three holes. These results have confirmed earlier results in the discovery hole TLC 42 where an intersection of 3m @ 5% Cu from 248m was intersected. The strike length of the zone is 2,500 which, together with the wide mineralised intersections, points to significant tonnage potential. Also Significant was the presence of the gabbro body under the volcanic rocks (confirmed in hole TLC 45), because this could be the primary source of the copper sulphide mineralisation. A diamond drill program is planned to commence to further evaluate the discovery in the next few weeks. News Due: Assay results from holes TLC 45, 52 and 54 from the Tollu Cu, Ni, Co project in WA. Price Target: A bullish wedge has formed and the price broke out last Thursday before successfully re-testing the breakout point on Friday. The target for the move is around 41 cents based on the height of the wedge. Disclosure: No Stock Held
