You are currently browsing the Online Stockmarket Trading Update blog archives for October, 2009.
The US markets finished lower with the Nasdaq down heavily. The Dow closed down 119 points or 1.2% at 9762, the S&P500 was down 20 points or 2.0% at 1042 and the Nasdaq was down 56 points or 2.7% at 2059.
Presented by Michael Hevern
MDSFinancial
Click here to watch the presentation.
or
Click here to download the mp3 audio recording (1004Kb).
General Advice Only
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In this morning s wrap
DOW: down 1.2% – Well Below 10,000
US Home Sales Surprise to Downside;
Broad Selloff; Given Back October Gains
Dollar Index: Finds Support
US$ Bounces Off 14 Month Lows;
A$ flat to 89.74
FTSE: down 2.3% (Well Off 13 Month High)
Banks & Materials Weigh; BG Profit 3Q Down 44%
DAX down 2.5% & CAC down 2.1%;
CHINA: up 0.3%
China Sovereign Fund has US$110bn to Spend
Hang Seng down 1.8%;
Oil: down 2.8% ($77)
Oil Falls With Markets
Gold: down 0.5% ($1028)
Commodities Lower;
Dollar Up
SPI Futures down 80 points (-1.7%)
Pullback Confirmed;
Three Week Lows on Inflation Concerns
ASX News
NAB FY Profit down 43%; Bad Debt up 14%
BLD 2009 could be bottom for housing
SUN to retain banking unit
CPI 3Q CPI up 1% -> RBA rates to rise 0.25%
Banks Annual results: ANZ Thu; MQG Fri
Materials, Energy & Bank all to see selling
ASX to open lower
US & UK October Bogie Grabs the Markets
Global mining products and services provider Industrea Limited (IDL) has marked its presence at this week’s China Coal & Mining Expo 2009, announcing today the signing of more than A$3.7 million of new product orders along with a new distribution agreement.
Visiting China for the leading tradeshow, Industrea Managing Director and CEO, Robin Levison, signed separate contracts for the delivery of an AMT directional drilling and methane gas drainage system to Zibo Mining Group’s Tingnan Coal Mine in Zibo City, Shangdong Province for A$3.05, along with A$0.7m contract for the delivery of AMT gas drainage drill rods to Beijing Huajin Wanshun Machinery Co. Ltd.
The agreement signed with Hydco International Sales Company Pte Ltd is for a three-year period through to September 2012, and follows recent exclusive distribution agreements in the same market for Filter Technology Australia filtration systems and Marathon RL run flat tyre technology. Attending the opening of the tradeshow in Beijing, Mr Levison said the company had now won more than $36 million in new product contracts to Chinese customers since the start of the new financial year in July.
Industrea Limited is a diversified mining products and services group based in Australia. Industrea provides integrated mining products and services, including open cut earthmoving and equipment hire, asset management, contracting and engineering services. Industrea’s range of mining products includes open cut Collision Avoidance Systems, Underground Directional Drilling, Aboveground Directional Drilling, Contractor Management, Mobile Asset Tracking and Driver Safety Performance Index, along with a range of flame-proof and explosion-proof underground diesel vehicles for the transportation of people and longwall mining equipment. The company’s products and services are distributed on a wide geographical footprint that includes Australia, USA, South America, South Africa, South East Asia, Russia and China. Our customers include major mining companies BHP Billiton, BMA, Anglo American, Rio Tinto, Xstrata, Barrick, Vale and the major Chinese mining groups, including China Shenhua Energy Company, Jincheng Anthracite Mining Group and Shanxi Asian American Daning Co. Hydco International produces a variety of top head drive exploration drill rigs for the mineral exploration industry. HYDCO rigs have been manufactured by Hydraulic Contracting & Supply Pty Ltd for the Australian and overseas market for over 25 years,
Hostech Limited (HTC) advises that it has reached agreement to purchase Plant Communications Pty Ltd which trades as Samsung Communications Australia. Contracts are currently being prepared by the parties. On a consolidated performance basis, the combined businesses will result in Hostech achieving profitability and provide significant growth opportunities. Plant Communications has exclusive rights to distribute Samsung’s business telephony solutions in Australia. PC has a nationwide distribution channel of over 60 specialist and accredited third party dealers selling its leading range of IP PBX solutions.
The owner of Plant Communications, Mr Steve Plant comments, “this is an exciting time for Plant Communications. The acquisition by Hostech will provide the support to further grow Samsung’s offering in the Australian business telephony market. In particular, growth into areas such as IP telephony and Corporate and Government contracts will be assisted by Hostech’s current market offerings and public company structure.”
The acquisition expands Hostech’s existing assets. Sholl Communications is a leading business telephone solutions dealership and OneNetwork is a hosted business telephony solutions provider. OneNetwork will benefit from access to Samsung equipment and the potential to broaden its product offering and distribution capability. Sholl Communications will use its project management and technical expertise to offer its leading capability in areas such as Cabling and Service and Maintenance as well as Enterprise IP Telephony. Hostech is well progressed in developing additional complementary offerings to assist the Samsung Partner Channel, including the establishment of a customer finance program. Such new developments will help to further drive Samsung Communications sales via its Partner Channel whilst enabling Hostech to create new profitable lines of business. The terms of the deal have been adjusted to reflect changes in the PC balance sheet. The consideration of $3.5m is made up of $3m of Hostech shares at $0.025 (2.5 cents) per share (120 million shares) ; $500,000 cash consideration; and $250,000 paid at completion and $250,000 to be paid within 3 months of completion based on cash targets set for Partner Channel.
ViroXis Corporation today announced a multi-million dollar agreement with TFS Corporation (TFC) to supply up to three tonnes of East India Sandalwood Oil per annum for the development of its botanical drug, albuterpenoids. The long-term supply agreement is conditional upon ViroXis gaining regulatory approval for commercialisation of albuterpenoids. The company has successfully completed a phase II investigator sponsored clinical trial, and expects to enter phase III FDA trials in 2010.
Chief Executive Officer of ViroXis, Dr. Paul Castella said: “Securing a long term supply agreement is a critical step for ViroXis as the drug is derived from therapeutic grade sandalwood oil. TFS is an important supply partner as it produces the world’s only sustainable supply of Sandalwood oil from its 2,500 hectares of plantations in the Kimberley region of Western Australia.” TFS Executive Chairman, Mr Frank Wilson said: “The ViroXis agreement marks the company’s first commercial scale contract within the pharmaceutical industry. “While the market for Indian Sandalwood oil is well established in the high-end cosmetics and fragrance houses, it has only scratched the surface of the pharmaceutical market at a time when global demand is outstripping supply,” Mr Wilson said.
ViroXis is a development stage botanical based pharmaceutical company focused on advancing and commercialising innovative medical products. ViroXis is currently developing the albuterpenoids, a novel, patented, defined mixture of compounds derived from East India sandalwood oil. Sandalwood oil has a long history of traditional use for a variety of conditions, including Human Papilloma Virus skin infections and pre-cancerous skin lesions. TFS Corporation Ltd (TFC) is an owner and manager of Indian sandalwood plantations in the east Kimberley region of Western Australia. As part of its vision to be a vertically integrated producer of finished sandalwood products, TFS owns a significant proportion of the plantations in its own right and in 2008 acquired Mount Romance Australia (Mount Romance), the Albany-based sandalwood processor and oil distributor.
To download this report as a pdf, click here!
“Profiting in All Markets” – now that is what we as traders and investors all aim to do! Last weekend the Australian Technical Analysts Association (ATAA) presented a conference aimed at traders and investors who use charting and quantitative share analytics to identify and trade shares successfully.
The conference brought together a diverse range of speakers including market makers, market timers, short and long term traders. These speakers covered topics such as:
This conference stands out because the presenters actually trade and they enthusiastically share their experience and knowledge with conference participants.
The key theme of the conference was that trading is a process and traders should be using a systematic and measured approach to trading. Traders must understand that markets move in cycles and they must be able to identify when a stock is in trend transition or in a persistent trend. Trading is dependent on trade expectancy which must be positive.
Using a systematic approach requires considerable back testing to give the trader confidence. Dr. Howard Bandy the author of the acclaimed book Quantitative Trading Systems, said that the design, testing and trading of a mechanical trading system can take anywhere up to 10,000 hours before the trader is completely confident that the system works.
When designing a trading system focus on trade consistency, equity drawdown and profitability, trade expectancy and avoiding over optimisation by careful selection of the market test data sets. Do not be afraid to follow a systematic approach which is consistently profitable, as this simply means that the trading system being used is in sync with the market. Strings of consecutive wins are great!
Markets move in cycles, and identifying these cycles gives the quantitative chart trader an advantage over other investors. Trading when the market cycle is trending either up or down produces the big money. Technical analysts aim to trade only when the market is moving and in so doing they must identify trends, whether they are creeping or thrusting. The earlier the trend is identified the bigger the profits attained. However, there is a balance between entering the trade too early and waiting for the trend to be confirmed. The key way to make profits is to ensure that trading capital is deployed in the markets and is consistently working with a positive expectancy. Trend traders, depending on the timeframe they trade in, can face periods of drawdowns of up to 40% and 60% before the trend resumes. Ideally, avoid sustained periods of drawdowns.
Traders need to be able to identify “trendy” stocks and markets, and understand the concepts behind creeping trends and trend thrusts, as their trading strategy will need to be adjusted accordingly. Share prices consistently move between periods of price contraction then price expansion.
The repercussions of the market turmoil experienced during the Global Financial Crisis (GFC) have led investors to question their Buy and Hold strategy, and as a result the demand for full service brokers is in decline. Online trading services, such as Trader Dealer, are looking to grab market share in the investment and trading space into the future.
A number of presenters referred to Reminiscences of a Stock Operator by Edwin Lefèvre, the story of the legendary speculator Jesse Livermore. Most consider this to be essential reading for anyone considering trading as a profession. One of the Jesse Livermore quotes I liked was this:
“And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! … I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.”
Many of the presenters were trend traders and all agreed that the real money that is “earned” by traders is acquired by identifying the underlying primary trend and trading in that direction. Traders need to manage their positions to gain as much exposure to the trend for as long as is possible, given their trading capital. Stick with the trend as long as possible. This is easy to say but very hard to achieve.
An example of where patience would have paid off is demonstrated on the chart below. This shows a trader or investor who used a simple 21 period moving average system would have reaped big money in the past couple of years. The trick is to be able to manage the trader’s emotions and psychology in periods of drawdowns.
Figure 1: ASX200 Weekly chart
Patience is the key to successful trading. However this quality is very difficult to acquire in the real world, where market noise created by “realtime” news services feeding directly to your terminal, television or smartphone conspire against you. From the 24/7 financial television and three-second guaranteed executions on Internet trades to after hours trading, the modern market environment lends itself to fostering a culture of continuous “frenzied” trading.
Avoid these temptations by taking a step back and start trading successfully by doing your research, determining the primary trend, trading your positions in that direction, and then just hurry up and hasten slowly.
The key philosophy behind quantitative trade selection is that profitable traders must understand that the big money is made by timing the market.
Those presenters who offered an opinion as to where the key world markets may be going generally agreed that the easy money in the current market bounce from the lows of earlier this year has already been made.
Jake Bernstein, the author of over 40 books on trading and investing, is of the view that traders should have a cautious stance in the current market climate. He threw up a number charts to support his view.
We at MDS Financial Research have been keeping subscribers abreast of the movements in the Chinese market since the middle of the year. We have been highlighting the fact that the Chinese market has been leading the western world, as markets have recovered from the worst market crash since the Great Depression. Take a look at these charts from Market Analyser.
Figure 2.1: United States S&P500 Peak to Trough 55% move in 34 weeks.
Figure 2.2: China’s Shanghai Composite Peak to Trough 100% move
in 39 weeks followed by a 25% fall in the space of 5 weeks.
Figure 2.3: Australia’s SPI Peak to Trough 55% move in 33 weeks.
The Chinese market has led the markets of the western economies by around six to eight weeks. The recent pullback in the Chinese market was around 25% in the space of five weeks. Those traders and investors who, after the turmoil of 2007 and 2008, agree that successful trading is all about timing the market and not time in the markets, should be protecting their capital in the near term.
In the United States the S&P500 has recovered in a sustained move up from trough to peak of 55% move in 34 weeks, while in Australia the SPI has recovered in a similarly sustained move up from trough to peak of 55% move in 33 weeks. These charts show that the US and Australia look be in sync with the Chinese market, though lagging by around six to eight weeks. If we adjust for the fact that the Chinese have been leading the markets of the western economies we can see that our markets may be in for a pullback in the near term. China has shown that pullbacks in the current market conditions can be quite sharp, hence the suggestion of a cautionary stance.
Conclusion
Trading capital is crucial for successful trading, and the lack of trading capital is probably the single most consistent reason why traders fail. There is no single “right” way to trade, as every individual is different.
Key issues traders must resolve:
The ATAA Conference was well worth the price of admission. The Annual conference is generally held each October and the ATAA endeavors to rotate the location Australia wide. The next conference is scheduled for Queensland next October, but if you cannot wait till then, refer to the ATAA website to find out when the next monthly meeting is being held at a location near you.
To keep up to date with market developments visit MDS Financial Research and take up a free trial.
By Michael Hevern
Head of Research, MDS Financial
Disclaimer
MDS Financial Group provides a range of specialist services that gives investors and traders the skills to make sound financial decisions. We maintain an un-biased, independent practice across areas of private client advice, corporate advisory services, online trading, research and analysis tools, real-time market information and stock recommendations.
This information is prepared for the general information of traders and investors. The information does not take into consideration the specific needs, investment objectives or financial situations of any person. Any individual reading this should discuss, with their financial planner or advisor, the merits of any recommendation or offer presented in this material for their own specific circumstances and realise that not all investments are appropriate for every individual.
Incorporating MDSnews, Bourse Data and Trader Dealer Online. Financial Services are provided by MDS Financial Services Pty Ltd AFSL No. 333298.
ING Industrial Fund has launched a $700 capital raising campaign, aimed at reducing debt and cutting gearing levels.
ING Real Estate, the largest shareholder, will not take up its entitlement, which is causing concern for some institutional investors.
The refinancing plan offers units at 48c, a 20% discount to Monday’s close price of 60c, spread between existing unitholders and an institutional placement.
IIF will remain in a trading halt until the placement is complete this afternoon.
ING Industrial
ASX Code: IIF
Chart from Market Analyser – Gold. Click here to take up a free software trial.
For more on this news story:
Presented by Michael Hevern
MDSFinancial
Click here to watch the presentation.
or
Click here to download the mp3 audio recording (947Kb).
General Advice Only
************************************************
In this morning s wrap
DOW: up 0.1% – Below 10,000
Mixed Concerns Over Earnings; House Prices Better;
M&A Activity in IT;IBM Doubles Buyback
Dollar Index: Finds Support
US$ Bounces Off 14 Month Lows;
A$ flat to 91.62
FTSE: up 0.2% (Off 13 Month High)
Bank Weigh; BP Beats F casts;
DAX down 1.7% & CAC flat;
CHINA: down 2.8%
Hang Seng down 1.9%;
Oil: up 0.9% ($79)
Oil Holds Despite Unexpected
Consumer Confidence Fall
Gold: down 0.6% ($1036)
Commodities Lower;
Dollar Up
SPI Futures down 21 points (-0.4%)
Push Towards 5000 Losing Steam
ASX News
NAB FY Profit down 43%; Bad Debt up 14%
BBG reaffirms guidance; sees strong 2H
IIF raising $700m
Banks Annual results: ANZ Thu; MQG Fri
Materials to see profit taking
Energy & Bank stocks hold
ASX to open lower
US & UK Losing momentum on earnings concerns
