Sunday Smorgasbord. Weekly Report for the week ending 12 August, 2016.
CONTENT
Australian Market: Weekly Performance Charts
Australian Market. XJO - Monthly, Weekly, Daily Charts.
ASX 100 - Stock Ratings
Top Ten Stocks
American Market, Risk-On or Risk-Off?
Summing up.
AUSTRALIAN MARKET: SECTOR PERFORMANCES IN THE PAST WEEK.
XAO up +0.73%.
Eight out of ten Sectors were up. Info.Tech up +6.49%. IT is a small segment of our market and is often a wild card. Don't take too much notice of that. Energy +2.2%. Health +1.88%. Worst two were
Utilities -4.18% and Telecoms -3.22%. Utilities was hurt by a very poor response to the AGL report. But - the other components of the Sector also performed relatively poorly. Utilities has been one of the best performers in our market - but the gloss has come off over the past two weeks. It's interesting that Property Trusts also did poorly, -1.76%. Utilities and Property are supposedly interest rate sensitive groups. Yet these falls have occurred at the same time as the RBA cut the cash rate. Something's not right here.
Ok. The market was up - so we'd expect a solid performance in the New Highs. Not so.
This week only 10 Stocks made New 52-Week Highs amongst the top 100 stocks. The previous week 23 Stocks from the ASX100 made New 52-Week Highs. That's a big drop during an up week.
87.9% of ASX100 Stocks are above their 200-Day Moving Averages. That's a marginal increase on the previous week. This is a measure of the long-term trend in the market. Currently it remains bullish.
69.7% of ASX100 stocks are positive on the short term trend measurement indicator, DPO. That's well down on the previous week. That's still bullish but dropping.
The internal strength of the market has surprisingly fallen quite significantly this week. Despite the positive overall result, the number of New Highs on the ASX100 has fallen, and the number of stocks positive on the trend measure DPO has also fallen. This is a disturbing effect and may suggest a reversal in our market is likely.
XJO, Monthly, Weekly, Daily Charts.
Monthly Chart:
We're now into the second week of August but it's far too early to make any judgements based on the Monthly Chart. At this stage we've had a small down week, but everything else remains bullish. The chart is currently stalling, but indicators remain bullish.
Weekly Chart:
XJO up this week +0.61%.
The medium term uptrend is up, but stalling at horizontal resistance.
Major indicators still don't show negative divergences which usually come before a down turn. Short term Stochastic (14.3.5) is overbought but the long term Stochastic (50.10.10) still hasn't reached overbought levels. Any pull-back is likely to be bought.
Daily Chart:
Short term Stochastic (14.3.5) is below its mid-line, but other indicators are relatively bullish. The chart is hovering at horizontal resistance and the 20-Day MA.
There's nothing particularly threatening in the above three charts, but they hide the internal weakening showing up in the breadth indicators I showed in Section One of this report. I'd be cautious.
ASX 100 - STOCK RATINGS.
Momentum is one of those anomalies which throws doubt on the Random Walk Theory of Stock Markets.
As a general rule, avoid stocks in the weakest sectors, and look to stocks in the strongest sectors. (There are always exceptions.)
The following charts show the stocks from the ASX100 in each of the ten sectors. Relative Strength is a blunt instrument. Use technical analysis for entry to these stocks.
Remember that the following charts show "relative strength", i.e., strength of the indices and stocks compared to action in the XJO. Bars above the zero line do not necessarily indicate that a stock or index is bullish - only that it is doing better than the XJO.
Utilities.
Utilities was down heavily this week.
The stand-out continues to be AGL. But, its Relative Strength Rating a week ago was 0.73; this week it is 0.56. That's a big drop in just one week. AST also performed poorly. A week ago its relative strength was 0.7. This week it is 0.52. Again, that is another big drop.
The previous week, all of the Utilities stocks in the ASX100 except APT were on 52-Week Highs. This week, no Utilities stocks are on 52-Week Highs.
On current prices, AGL pays a dividend of 3.6%. Dividends are: APA 4.3%, AST 5%, DUE 6.9%, SKI 4.9%. These are tempting dividends, but until we see a return to favour in the Utilities it might be wise to keep your powder dry.
Industrials:
The Industrials Sector is home to some of the better performing stocks on the ASX100. Aristocrat Leisure is the standout and set a new 52-Week High this week. Relative Rating 1.21.
Blackmores looks good but that's due to a great performance early in the year. Blackmores is now below its 200-Day MA, so ignore it.
Aristocrat is the best performer. Transurban, Seek, Sydney Airports and Brambles are all performing well. TCL (Transurban) pays a solid dividend of 4%. Sydney Airports also pays a solid dividend of 3.8%.
Two other stocks besides Aristocrat made 52-Week Highs this week: Downer EDI and QUB. Anything making a new 52-Week high is worth thinking about.
Materials:
Materials was up +1.11%
The two best performers are non-miners: Bluescope Steel and James Hardie. Both are building materials companies and riding the property boom. FMG continues to perform well and is the best of the Miners.
No stocks made 52-Week highs this week.
On current pricing, ABC pays 4%, Boral pays 2.9%. None of the top performing miners pays a good dividend.
Financials X-Property:
XXJ is one of the worst performing sectors on a one year basis. The four big banks are all on the negative side of the ledger. Forget about the big banks until we see some solid improvement.
CGF is the best performing stock and pays a dividend of 3.3%. CGF is a fund manager.
ASX made a new 52-Week High and pays a dividend of 3.8%. It's an improver and worth a look.
The banks all pay healthy dividends, but until we see a turn around in their prices, the risk is a bit too high.
ANZ, CBA and Westpac all reported this week. ANZ did best up >5% this week. CBA -0.18%. Westpac -1.89%. So despite the rantings by Pollies about exorbitant profits amongst the big banks, the market only thinks that ANZ did well.
No stocks from the Financials X-PTY makes it into my Top Ten Stocks.
Health and Information Technology:
Health remains the best performing Index. Cochlear is the standout and set a new 52-Week High this week.
Carsales.com (CAR) is clearly a standout in Info.Tech. Dividend Yield 2.9%. CPU set a new 52-Week Low. Avoid.
Consumer Staples:
TWE is one of the best performers in the ASX100 on a 1-year basis. But in recent weeks it hasn't performed well. I'd be wary about entering TWE at this level, but watch. It has been such a good stock it could easily come good.
WES is still the pick of the two big retailers, if you must have one in your portfolio. Wesfarmers yield is 4.7%. WES has been in a wide trading range for most of the past year. It seems now to be on a down move within that trading range. If you're a dividend hunter, it might pay to wait and try to buy at a lower figure.
Woolworths looks like it could be turning around. It was flat this week in an up market. it is currently above its 200-Day MA. I still don't like it. I'd like to see more positive results before buying into this as a turn-around story. But - you might think otherwise.
WOW Dividend is 4.7%. That puts it on a par with WES as far as dividends is concerned.
Consumer Discretionary and Telecomms.
Consumer Discretionary made a new 52-Week High this week, the only sector to do so this week.
Three stocks stocks made 52-Week Highs: DMP, Star Entertainment and JB Hi-Fi.
DMP is the stand-out. I've been nervous about the status of DMP, but there's no doubting its price trend. So it seems to be OK.
JBH pays 3.4%
Telecomms are interesting. Telstra remains enticing to the dividend hunter: dividend +5.7%. It is now dropping from the top of its trading range, so, if you're looking for divvies you might be able to catch this at a better price in the near future. It remains a poor performer on a one-year basis.
VOC and TPM are both performing well, but are growth stocks.
Energy.
On a one-year basis, Energy is a dreary sight. It continues to act in a volatile, erratic manner. Until we can see a strong up trend established, it's best to avoid.
It could be on the brink of establishing such an up trend as it has been in a sideways consolidation for some months. But it hasn't happened yet. Wait and watch.
Property
Property is an industry group in the Financials Sector, but is worthy of standing alone for analysis. On a one year basis, it is one of the better performers in our market. Most of the stocks are performing well. No stocks made 52-Week Highs this week.
All stocks in the sector pay dividends better than 3% so are worth a look, with the exception of LLC which is performing poorly.
A cost effective entry to the sector is provided by ETFs such as SLF. Dividend Yield: 3.3%. It went ex-dividend on 29 June. Dividends are paid quarterly.
American Market: RISK-ON/RISK-OFF
Major turning points in the American market often result in correlated turns in most world markets including Australia. The above chart shows the relationship of 10-Year Treasuries (TNX) to 30-Year Treasuries (TYX). When TNX underperforms TYX, it usually results in a Risk-Off market. The chart for TNX:TYX has decisively turned back up from below the 50-Day MA. A double bottom has formed which is a positive.
At this stage, the Ratio is in Neutral. It needs to get back above the down trend line shown on the chart, and, preferably, above the 200-Day MA.
TOP TEN STOCKS FOR AUGUST:
The Top Ten Stocks for July returned +10.739% while the XJO rose +6.28%. So far, in the past three months, the Top Ten has consistently and significantly beaten its benchmark, the XJO. The best performer in the Top Ten for July was Bluescope Steel, up +32.65%. The worst performer was Treasury Wines, up +4.55%.
The Top Ten Stocks for August are unchanged from July. The stocks are: TWE, AGL, Cochlear, MGR, DMP, VOC, JHX, BSL, ALL, TPM.
Summing up:
The market was up this week, but were weak. That suggests that trouble is brewing under the surface which is not evident in broad market indices such as the XAO and XJO.
The three strongest sectors in our market on a yearly basis are: XUJ, XDJ and XHJ. But XUJ took a thumping this week. I'd look elsewhere until we can see a turn back up in that Sector. The best bets seem to be in Consumer Discretionary and Health.
Risk-On/Risk-Off indicator on the American market is now in Neutral.
Seasonality in the latter part of August is usually poor.
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