Posts Tagged ‘Commodity prices’

Bulls Remain In Control as Markets Make New Highs

Friday, May 17th, 2013

Weekly Market Wrap

Stock markets have been strong again this week, with many making new all-time highs. The US and German markets have been particularly impressive, and Japan is at 4½ year highs. Trader sentiment has been buoyed by speculation that soft economic data will firm the resolve of the central banks’ commitment to continue their stimulus programs.

Closer to home, the Federal Budget was handed down with a $21 billion turnaround, but this did not affect the equities market. Nevertheless it has been a terrible week for mine services companies with a number reporting profit downgrades and subsequently seeing their share prices punished. The mining sector has suffered from the weaker commodity prices, with gold cracking below the $1,400 level and iron ore prices now down over 20% from February highs.

US stock markets are hovering around new all-time highs. Traders have responded positively to soft employment, housing and manufacturing data, as the Fed Chairman Ben Bernanke confirmed that the US Federal Reserve will continue its unprecedented stimulus until the jobless rate falls to 6.5 percent or inflation rises above 2.5 percent. However overnight we saw some profit-taking as the Federal Reserve Bank of San Francisco President said the central bank may begin slowing the pace of its $85 billion in monthly bond-buying amid signs the economy is gradually gaining strength.

The Dow Jones has remained above the 15,200 level. The S&P500 again held at the 1650 level near all-time highs and has closed higher for nine of the last eleven trading sessions (up 16% for the year). Nearly 200 of the S&P 500 stocks are at 52-week highs, the most since 1993. The gains have been broad based as over 85 percent of S&P 500 stocks are trading above their 50-day moving average, according to Bloomberg (the highest level since 14 March).

European stock markets are hovering around 5-year highs. The Europe Stoxx 600 is up 10% for the year and is at its highest level since June 2008. It is clear that the ECB will remain supportive of equities going forward. Across the region the commodity related sectors weighed again, after JPMorgan lowered its forecast for Chinese 2013 gross domestic product growth to 7.6 percent from 7.8 percent, citing weak domestic demand. Traders also received confirmation that the eurozone is suffering its longest recession since the GFC, as a Eurostat report showed the eurozone economy shrank more than economists had forecast, extending its recession to a record sixth quarter as GDP fell 0.2 percent in the first quarter, after sliding 0.6 percent in the final quarter of 2012. The longest recession since 2000 is the 15-month long contraction in 2008-2009.

The German market held a new all-time high and is up 10% for the year. In London traders pushed the FTSE to its highest level since December 2007, after the Bank of England said that an economic recovery in the UK is now “in sight”, predicting that growth will accelerate to 0.5 percent in the second quarter from 0.3 percent in the first three months of the year.

Asian stock markets have held on to recent gains, hovering around 5-year highs. The MSCI Asia Pacific Index is up 10% for the year and is on track for the longest winning streak since September 2009, on optimism over central bank stimulus, Japan continuing to deploy more measures to beat deflation and as centrals banks remain supportive in the US and Europe. In Japan the market held above 15,000 at 4½ year highs, on the back of a weaker yen. The pullback was despite Japanese GDP surprising, rising an annualised 3.5 percent in the three months through March, the most in a year (better than the forecast 2.7%), while fourth-quarter growth was revised to 1 percent. The Chinese market saw some bargain hunting, having its best gain in 2 weeks, as the Shanghai Composite is now only down -0.8% for the year, having fallen around -9% from its February peak. Of the around 420 companies on the MSCI Asia Pacific Index that reported their latest quarterly results since April, 53 percent have beaten analyst forecasts, according to Bloomberg.

In today’s Analyst’s Eye we discuss what happens if you get caught on the wrong side of a gap trade in Mind the Gap.

The month of May has ended lower in the past three straight years, but according to a study done by Goldman Sachs the market has never been down for four consecutive months of May in the past 80 years and the bulls are succeeding in providing support this month so far.

The Aussie market is still hovering around 5-year highs, even as the materials sector gave back half the prior week’s gains, on the back of weak commodity prices. The finance sector has held on to gains as the chase for yield has pushed that sector 10% higher in the past six weeks and the telecom and property sectors have enjoyed a similar outperformance.

The market has held around the 5200 level and this level will be key for next week. Once again the All Ords is testing the key 5160 level. The ASX200 market is flat for the week having bounced off the 5150 level. The main drivers have been banks going Ex-dividend and the weak commodity prices which have hurt the materials sector, downgrades from the mining services sector, and the Federal Budget.

ASX XJO

Key levels for the ASX200 index next week will again be 5100 and 5250, with 5160 the key near term pivot level. Volatility remains relatively subdued, affording cheap protection for your portfolio. We are holding above the 13-day moving average and this level will be key for the trading in May.

Protection is still relatively cheap and investors can have cheap insurance for their portfolio and could look to put their money to work, while reducing their risk by using options and warrants strategies. Remain attuned to the news from overseas, particularly from the eurozone (corporate earnings), China (stimulus) and the US (corporate earnings). Monitor the US dollar for a guide to the future direction of commodities and equities prices.

Contact me at D2MX Advisory on 1300 610 024 and we can help you trade, using a number of strategies that will give you the tools to navigate this market and help you improve your returns on investment.

Michael Hevern
Investment Adviser D2MX Advisory

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

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Markets Bounce in “Risk-on” Move: Weekly Market Wrap

Friday, April 12th, 2013

Stock markets bounced sharply this week on the back of reassurances by central banks globally that they will keep the stimulus tap running at full throttle and some surprising Chinese CPI data that revealed inflation remains in check, which provided support for commodity prices. The US markets have made new all-time highs and the Japanese market is up 55 percent from its November lows, while in Europe the markets rebounded.

In today’s Analyst’s Eye we discuss how you can significantly boost the dividend yield in your SMSF by trading the bank shares using Instalment MINI Warrants.

The Aussie market has rebounded strongly this week as the materials sector surged, after commodity prices rebounded off key support levels. The market is trading at the mid-point of its trading range of the past two months. The ASX recovered from three weeks of selling in a “risk-on” move and resumed its consistent string of gains. It has now been up for fifteen of the past twenty weeks, with the All Ords back around the 5000 level.

The ASX200 market is up 2.6% this week and has broken through the 5000 level near-term. The main driver has been the news out of Japan regarding aggressive stimulus, Chinese data and the optimism ahead of the US reporting of corporate earnings which starts in earnest next week.

The Aussie jobless rate rose to 5.6 per cent in March, its highest level for 3½ years, following a surprise leap in employment last month. This sparked optimism that the RBA will still need to cut interest rates further.

ASX XJO

Key levels for the ASX200 index next week will be 4930 and 5070, with 5000 the key near term pivot level. Volatility is easing and is still cheap, affording cheap protection for your portfolio. We have rebounded back above the 13 and 50 day moving averages, and these will need to hold as support for the positive momentum to continue near term.

ASX sectors all traded higher, with the property sector breaking to new 4½ year highs and the telecom sector just shy, even the materials sector managed to bounce for the first time in 7 weeks.
Protection is still relatively cheap and investors can have cheap insurance for their portfolio and could look to put their money to work, while reducing their risk by using options and warrants strategies.

Remain attuned to the news from overseas, particularly from the eurozone (stimulus), China (stimulus) and the US (corporate earnings). Monitor the US dollar for a guide to the future direction of commodities and equities prices.

Contact me at D2MX Advisory on 1300 610 024 and we can help you trade using a number of strategies that will give you the tools to navigate this market and help you improve your returns on investment.

Michael Hevern
Investment Adviser
D2MX Advisory

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

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Weekly Market Wrap: The Christmas Rally Continues

Friday, December 21st, 2012

The Christmas rally continues for most markets around the world. Most of the European and Asian bourses are testing year highs and the US markets have pushed near October highs. In the past markets have had a seasonal tendency to trade higher into the holiday period and this year seems to be an exceptional example. The only seemingly negative sentiment to be found surrounds the US “fiscal cliff” as markets wait for the US government’s plan of attack on this problem.

The US markets have had a strong week with the major indices posting gains in three sessions out of four so far this week. This bodes well for a push higher into year’s end. The S&P 500 is now up 14 percent for the year. Since the 1980s the US markets have averaged a gain of 1.5% for December, and they are now up 1.5% for the month so far. US investors have been positioning for a resolution of the “fiscal cliff” before Christmas so expect markets to be especially news-driven until the issues are finally resolved, and this could take as late as January next year.

European stock markets are continuing on their amazing run, and most have hit fresh 18-month highs overnight as investors push money into the markets. The Stoxx 600 is at its highest level since May 2011 and has rallied 15 percent for the year, as optimism grows that the US Congress and President Barack Obama would resolve the impasse over the US budget and as the European Central Bank remains committed to an “unlimited” bond-buying plan. In a further step towards financial unification of the Eurozone countries, the European financial leaders agreed to put the ECB in charge of all large Eurozone lenders, rather than their national regulators. Some 200 banks will qualify for oversight by the ECB. The German market is trading at its highest level in nearly five years, and this market is now up 28 percent from its June lows. In the UK the FTSE remains around 8-month highs.

Asian stock markets have been on the rise again this week, with the regional benchmark index making fresh highs. The Chinese market has traded positively which is encouraging after its large move last week. Investors reacted positively to the news from the US Federal Reserve and the Chinese data that confirmed the economy is bottoming. The MSCI Asia Pacific Index has advanced for the past four weeks, recording its longest winning streak in three years, on the back of signs of economic growth improving in the world’s largest economies. The index is up 12% for the year, following announcements from central banks globally of added stimulus designed to spur growth and data that is indicating that the Chinese slowdown may be bottoming. The Chinese market is up 4.8% for December and is still trading around 1-month highs, but the leadership still needs to stimulate the domestic economy in order to push GDP growth back above 8%. In Japan the market rose again above 7-month highs, with exporters advancing as the yen touched a 9-month low. Polls show that the Liberal Democratic Party looks likely to gain a majority in the upcoming election. Machinery orders have risen for the first time in three months.

In commodities generally industrial metals continue higher while the precious metals have had a large fall. Iron ore is up 45% from its September lows, copper is up nearly 9% in a month, aluminium is up 13% since October lows. Gold has fallen from $1700 to $1645 this week, a fall of 3%. Silver has also fallen, going from $32.50 to $29.90, a drop of 8%. Crude oil has posted gains of over 3% this week with WTI rising from $87 to $90 a barrel.

The Australian market has pushed higher and is trading around the 4650 level this week. Our two largest miners have been the major catalyst in helping the XJO push higher with BHP posting gains of nearly 3% for the week and RIO over 4%. Today the banks have added to the gains with some even breaking past recent resistance. Generally our market has rebounded on the back of positive sentiment around the globe. Be aware that we may see a short-term top in the market in the next couple of weeks, so be ready to protect your position and/or take profits.

Jonathan Tacadena
Trading Desk Manager, D2MX

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Weekly Market Wrap: Markets Hold As New Month Begins

Friday, November 2nd, 2012

Markets have been facing some serious challenges of late and appear to be weathering the storm near-term.  The US markets have rebounded in the aftermath of the super storm Hurricane Sandy, which shut down the US markets for the first weather-related shutdown since 1888.  Economic data released this week showed that the US economy is slowly improving and the Chinese economy could be stabilising, after seven quarters of slowing growth.

US stock markets are back in action and rose overnight, recording their best session gains in nearly two months.  All three benchmark indexes were up over 1.1% for the session, as gainers outnumbered losers by over two to one. In October the S&P 500 index fell -2%, due to concern over the slowing economic growth and its impact on corporate earnings. The S&P 500 index is still up 15 percent from its June lows and hit four-year highs in mid-September.  On the earnings front earnings have exceeded expectations at 72 percent of companies that have released third-quarter results, while sales have missed estimates at 60 percent of the copanies, according to Bloomberg data. In economic news the Institute for Supply Management’s US factory index rose to 51.7 in October (up from 51.5), while corporates expanded payrolls in October by the most in eight months.  Also the Conference Board’s consumer sentiment index increased to 72.2, the highest since February 2008.  Investors will be looking to the Labor Department’s monthly Non-Farm employment report for an indication of the strength of the US economy, as they prepare for next week’s presidential election. According to Bloomberg data, economists are expecting that payrolls increased by 125,000 workers in October and the jobless rate rose to 7.9 percent.  The US elections will be held next week.

European stock markets rebounded the most in two weeks, on the back of improving global economic data.  The Stoxx Europe 600 Index rose 1.3%, its biggest gain since mid-October.  The benchmark index has now completed its fifth straight month of gains and has jumped 17 percent from its June lows, following the announcement from the European Central Bank policy makers agreeing on an “unlimited” asset-purchase program and the Federal Reserve announced a third round of quantitative easing (QE3++). Trader sentiment was boosted by improving manufacturing news out of China and the US, which proved better-than-expected. However trading volumes were over 35 percent below the monthly average for most of the week in the wake of Hurricane Sandy. Trading has been driven by the earnings season which has been mixed. The insurance companies have been the focus in the face of Hurricane Sandy.  Investor sentiment was hit early in the week, as the Spanish economy contracted for a fifth quarter in the three months through September, as gross domestic product (GDP) shrank 0.4 percent from the previous three months, according to the Bank of Spain.  There are also concerns that Spain will face less pressure to seek a bailout after a victory in regional elections for Prime Minister Mariano Rajoy. Elsewhere Greek political leaders are under pressure to seek agreement on further austerity in the form of labor reforms and structural changes needed to qualify for more aid under the country’s international bailout.

Asian stock markets have started the month positively. The MSCI Asia Pacific Index ended flat overnight, recovering from early losses and the index was down -0.4% for October, after over half the companies that reported earnings missed analyst estimates, according to Bloomberg data.  The benchmark index is up 12 percent from its June lows, following stimulus measures announced in the US, the ECB, Japan and China aimed at boosting sentiment in the face of slowing global economic conditions and the European debt crisis.  The markets in China and Hong Kong have pushed higher, after Chinese manufacturing expanded for the first time in three months as output and new orders climbed, signaling growth in the world’s second-biggest economy is rebounding after seven quarters of slowdown. The National Bureau of Statistics reported the Purchasing Managers’ Index (PMI) climbed to 50.2 in October (up from 49.8) and in a separate survey from HSBC Holdings Plc and Markit Economics increased to an eight-month high.

Commodities have been generally weaker again this week, with gold holding around 6-week lows, crude-oil at 3-month lows and copper heading for its longest slump in 7-weeks, all on concerns over slowing global growth.

The Australian market is backing off 15-month highs and is threatening to breakdown out of its rising channel which has been in place since June, as our reporting season gets underway.  The market is hovering around the 4450 level. The news out of China is indicating that their economy may be bottoming around current levels and investors are still betting that Reserve Bank of Australia Governor Glenn Stevens will follow up with another interest rate cut in this month, to 3% which would be a 50 year low and the lowest since back at the height of the GFC.  In our market the all sectors are looking to finish the week flat to slightly lower, and the banks are going Ex-div over the next week.

Protection is still cheap at the moment and investors should have protection in place for their capital, and could look to put their money to work, while reducing their risk by using options and warrants strategies.   Remain attuned to the news from overseas, particularly from the eurozone, China-Japan and the US.  Monitor the performance of Italian and Spanish borrowing costs (which are currently at six month lows), China-Japan tensions and the US dollar for a guide to the future direction of commodities and equities prices. 

The S&P/ASX 200 index is currently trading at 4460 after backing off its 15-month highs. Key levels for the index next week will be 4400 and 4520, with 4450 the key short term pivot level.  Traders are being cautious on the back of the global central bank stimulus, wary about whether this stimulus will be enough to boost global growth and the implications of Hurricane Sandy.  Traders will also be monitoring the US elections and the US Non-Farm Payrolls employment report and the impending once-in-a-decade leadership change in China.

Contact me at D2MX Trading on 1300 610 024 and I can help you trade using a number of strategies that will give you the tools to navigate this market and help you potentially improve your returns on investment.

Michael Hevern
Investment Adviser D2MX Advisory

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

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Weekly Market Wrap: Markets Face Testing Time in Face of Uncertain Earnings Picture

Friday, October 26th, 2012

Markets saw sustained profit-taking this week for the first time since their rebound from the June lows, as the quarterly reporting season got underway around the globe.

In the US stock markets have backed-off key levels this week in the face of disappointing 3Q earnings. In the S&P 500 reporting season to date 3Q sales have missed forecasts at 61 percent of companies, while of the companies that have reported 70 percent beat analysts’ earnings estimates, according to Bloomberg data. Earnings forecasts for the next quarter have disappointed pretty much across the board.

The S&P 500 recovered modestly overnight, up from its lowest level in seven weeks. The index is now down -3.6% from this year’s high last month, but it’s still up 12% in 2012, on the expectation that central bankers will keep economies expanding. Commodity-related stocks have been weighed down in the face of weaker commodity prices across the board. Economic news in the US continues to show improvement and the home building sector continues to outperform, after reports showed retail sales and industrial production increased more than forecast in September and new-house construction jumped to the highest level since 2008.

European stock markets are testing key 3-month support levels and are in the process of digesting earnings reports in the face of deteriorating economic conditions. The Stoxx Europe 600 Index is currently down -1.4% so far this week, as company earnings missed estimates. Of the 89 companies that have reported profit so far this season, 52% have beaten estimates, according to Bloomberg data. The index has risen 16% from its June lows following the European Central Bank announcing an ”unlimited” bond-buying program and the Federal Reserve announced QE3++.

Investor sentiment has taken a hit as the Spanish economy contracted for a fifth quarter in the three months through September. Gross domestic product shrank 0.4% from the previous three months, according to the Bank of Spain. Moody’s Investors Service lowered its credit rating on Catalonia and four other Spanish regions, citing “deterioration in their liquidity positions” and “very limited cash reserves as of September 2012″, plus their heavy reliance on short-term funding.

Overnight in London the market closed higher as a report showed the UK has moved out of recession in the third quarter. The UK economy expanded in the third quarter more than expected, with gross domestic product (GDP) climbing 1% from the second quarter, when it was down -0.4%. Eurozone consumer confidence remained little changed in October after decreasing in the previous four months, remaining at the lowest levels since May 2009.

Asian stock markets have generally had a good run this week, with the ASX hovering around 15-month highs. The MSCI Asia Pacific Index is up 12 percent from its June lows, following stimulus measures announced in the US, the ECB, Japan and China aimed at boosting sentiment in the face of slowing global economic conditions and the European debt crisis.

In Japan the Nikkei 225 Stock Index has been on the rise, as the yen touched a four-month low against the US dollar, and exporters drove the gains. In Hong Kong the Hang Seng Index has risen for eleven straight sessions, its best winning streak since mid 2006. Stocks have rallied on speculation that the Chinese economy will rebound as central banks hold down interest rates. The share market posted healthy gains after signs of increased capital inflows, as the Hong Kong Monetary Authority stepped into the market last week for the first time in three years to weaken the Hong Kong dollar, in order to maintain its peg with the US dollar. This was required because there had been a number of weeks of capital inflows pushing up the value of the Hong Kong dollar, which is generally a positive signal for equities in the near-term. Hong Kong is the only venue in China where foreigners can freely buy and sell shares of the country’s biggest companies.

Conversely, the Chinese Shanghai Composite Index has fallen to its lows for a week, despite Chinese factory output and retail sales accelerating in September, even as growth slowed for a seventh quarter, according to government data. The Chinese market is expected to drift ahead of the 18th Communist Party Congress in early November, which will oversee the once in-a-decade transition of leadership. The third-quarter earnings reporting season has started for the major companies this week, and of the 47 companies that have reported so far on the regional benchmark index, nearly 60 percent have missed analyst estimates.

Commodities have been generally weaker this week, with gold at 6-week lows, crude-oil at 3-month lows and copper heading for its longest slump in 7 weeks, all on concerns over slowing global growth.

The Australian market is backing off 15-month highs, as our reporting season gets underway. The market is hovering around the 4500 level. The news out of China is indicating that their economy may be bottoming around current levels and investors are still betting that Reserve Bank of Australia Governor Glenn Stevens will follow up with another interest rate cut in November. A drop to 3% would be a 50-year low and the lowest since back at the height of the GFC.

In our market all sectors are looking to finish the week in the red, except for the defensive, telecom and property sectors which are holding up because of their yield, as traders have been coming to terms with their optimism over the central bank stimulus.

Protection is still cheap at the moment and investors should have protection in place for their capital, and could look to put their money to work while reducing their risk by using options and warrants strategies.

Remain attuned to the news from overseas, particularly from the eurozone, China, Japan and the US. Monitor the performance of Italian and Spanish borrowing costs (which are currently at six month lows), China-Japan tensions and the US dollar for a guide to the future direction of commodities and equities prices.

The S&P/ASX 200 index is currently trading at 4500 and is backing off its 15-month highs. Key levels for the index next week will be 4420 and 4530, with 4480 the key short term pivot level. Traders are being cautious on the back of the global central bank stimulus, wary about whether this stimulus will be enough to boost global growth.

In this week’s Analyst’s Eye we talk about how you can Insure Your Portfolio using options.

Contact me at D2MX Trading on 1300 610 024 and I can help you trade using a number of strategies that will give you the tools to navigate this market and help you improve your returns on investment.

Michael Hevern
Investment Adviser D2MX Advisory

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

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Weekly Market Wrap: Traders Take Some Profits After Stellar Week

Friday, October 19th, 2012

Traders pushed the markets higher this week, as markets recovered all of their losses from the previous week. Markets are again testing key overhead resistance which has been in place for many months, and many years in some cases. Trader sentiment has recovered from the news that the World Bank and the IMF reduced their estimates for global economic growth, while concerns over the eurozone debt troubles have abated, ahead of the two-day EU leaders’ summit, which is currently underway.

US stock markets have rebounded from their key support levels and are again testing multi-year highs, with the S&P 500 only 8% away from its all-time highs from back in October 2007. The US economic news continues to improve, particularly in the housing sector, however some disappointing results from bellwether technology stocks have weighed on sentiment in the past week.

The technology sector has weighed after disappointing earnings from IBM, Google and Intel. IBM, which accounts for over 11 percent of the Dow Jones Index, said that corporate customers are showing caution in placing orders and consumers in developed markets are delaying PC purchases.

In US economic news the Department of Commerce reported retail sales rose 1.1 percent in September (beating the 0.8 percent gain forecast) and August sales were revised up to 1.2 percent. Meanwhile the Federal Reserve in Washington reported that output at US factories, mines and utilities rose 0.4 percent in September, compared with a -1.4 percent decline in August, which was the biggest since March 2009. Manufacturing, which makes up 75 percent of the total, climbed 0.2 percent, while manufacturing in the Philadelphia region expanded in October for the first time in six months, reaching 5.7 (up from -1.7 in September), a sign the industry may be starting to stabilise (a reading above zero indicates expansion). Consumer confidence unexpectedly climbed this month, while the Fed Reserve’s Beige Book showed that the US economy was expanding “modestly” last month. On the earnings front, of the 95 S&P 500 companies that have reported so far over 70% have beaten earnings estimates, with 23 companies missing forecast earnings, according to Bloomberg. All 10 S&P 500 industry sectors are looking to finish the week in the green.

European stock markets have climbed every day this week, despite caution ahead of the two-day European Union’s leaders’ summit. The Stoxx Europe 600 Index had its first three sessions of consecutive gains since early September. The index has still managed an 18% jump from its lows in June, supported by the European Central Bank (ECB) unveiling an “unlimited” bond-purchase plan and the Federal Reserve starting a third round of quantitative easing (QE3). Traders turned to “risk on” after two German lawmakers said Germany is open to Spain seeking a precautionary credit line, which is a back-down of German resistance to a full sovereign bailout for Spain.

Across Europe the financials led the gains, but miners also performed well after positive Chinese data. Traders were positive after the news that the Moody’s Investors Service left unchanged its investment-grade debt rating on Spain and US house building surged to a four-year high. The EU leaders’ meeting in Brussels has some heavy issues to resolve, as French President Hollande has said that the efforts to stem the eurozone debt crisis may unravel if EU member states fail to deliver on their promises. President Hollande has called on the eurozone to introduce a banking union, to provide economic help to countries that reduce budget deficits.

Asian stock markets rose this week, after Chinese economic growth reported in-line with economists’ forecasts. The ASX hovering around 15-month highs. The MSCI Asia Pacific Index has rebounded this week and is on track for the highest close since mid-September, and all the 10 industry groups are looking to finish in the green for the week. In Japan the Nikkei 225 Stock Index has rebounded from early weakness to record its biggest 3-day gain since March. Traders cheered comments from the Japanese economic minister who called for stronger stimulus from the Bank of Japan, which meets at the end of the month. The Chinese market is pushing to new monthly highs on the back of news that Chinese gross domestic product (GDP) expanded 7.4 percent in the third quarter from a year earlier, as expected. The government also reported data for industrial production, retail sales and fixed-asset investment which all accelerated. Chinese GDP rose 2.2 percent from the previous period, which is a four-quarter high. Chinese Premier Wen Jiabao said the Chinese economic situation last quarter was “relatively good”, signaling that the nation’s slowdown is bottoming. The Chinese Communist Party will nominate new leaders at its 18th congress starting 8 November, in its once-a-decade leadership change. Traders are expected to remain cautious up till that time.

In commodities crude-oil prices have recovered from weakness earlier in the week, and are looking to close the week around $US92 again. The gold price continued to back off 11-month highs and is now trading around the $US1,750 level, as traders price in the global quantitative easing. Copper prices bounced off their 50-day average price.

The Australian market surged on open yesterday, and the ASX is investigating trading irregularities in the opening auction process for a number of stocks including ANZ, CBA and Brambles. The market is hovering around the 4550 level, as we saw short covering above the key 4520 level. The Australian market has jumped higher, closing at its highest level in 15 months, as traders cheered the news out of China that their economy may be bottoming around current levels and bet that Reserve Bank of Australia Governor Glenn Stevens will follow the last interest rate cut with another reduction in November, bringing the cash rate to 3%. This would be a 50-year low and the lowest rate since back at the height of the GFC. In our market all sectors are looking to finish the week in the green, as investors took their cue from overseas investors and as traders have been coming to terms with their optimism over the central bank stimulus.

Protection is still cheap at the moment and investors should have protection in place for their capital, and could look to put their money to work, while reducing their risk by using options and warrants strategies. Remain attuned to the news from overseas, particularly from the eurozone, China, Japan and the US. Monitor the performance of Italian and Spanish borrowing costs (which are currently at six-month lows), China-Japan tensions and the US dollar for a guide to the future direction of commodities and equities prices.

The S&P/ASX 200 index is currently trading at 4555 and is looking to close the week at a 15-month high. Key levels for the index next week will be 4450 and 4590, with 4500 the key short term pivot level. Traders are still buying on the back of the global central bank stimulus, in anticipation that it will be enough to boost global growth.

In this last week’s Analyst’s Eye we introduced you to the Instalment MINI warrants that are the latest generation of Instalments Warrants providing straightforward and transparent leveraged exposure to Australia’s leading companies, for individuals and Self Managed Super Funds. This strategy would have paid off handsomely on the ANZ trade this week.

Contact me at D2MX Trading on 1300 610 024 and I can help you trade, using a number of strategies that will give you the tools to navigate this market and help you improve your returns on investment.

Michael Hevern
Investment Adviser D2MX Advisory

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

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Weekly Market Wrap: Markets Boosted By Central Bank Stimulus

Friday, October 5th, 2012

Traders held their nerve this week, as they awaited news from the ECB as to when the “unlimited” bond buying program would commence. In the US traders are also watching out for the Non-Farm Payrolls employment report due out tonight.

US stock markets have closed higher every day this week and the three benchmark indexes are up around 1.4% for the week so far. In the broader market all 10 industry groups in the S&P 500 are on the rise, with the financials and commodity-related sectors rebounding and leading the gains. The home builders and coal stocks were among the best performers this week. The crucial Non-Farm payroll employment report is due out tonight and analysts expect the government jobs report to show that the economy created 115,000 jobs last month and the unemployment rate increased to 8.2 percent (up from 8.1 percent last month). The S&P 500 has rallied 16% for the year, as central banks in the US, Japan, the ECB and China have introduced measures to stimulate economic growth. In the US the Federal Reserve last month announced a third round of quantitative easing by purchasing mortgage-backed securities at a pace of $40 billion per month until labour markets improve.

European stock markets have bounced off 3-week lows, as traders await news on when the ECB bond-buying will begin. The Stoxx Europe 600 Index is up 1.5% this week and the index has climbed 11% for the year as ECB policy makers agreed on an “unlimited” asset-purchase program to bring down borrowing costs in Spain and Italy and as the Federal Reserve announced a third round of quantitative easing. The ECB President Mario Draghi has reaffirmed that the central bank is ready to start buying government bonds as soon as the necessary conditions are fulfilled, as they kept the benchmark interest rate at a record low of 0.75 percent, as expected. Traders are still waiting on the Spanish government to request a bailout from the ECB and Spanish three-year borrowing costs increased to 3.95% (up from 3.85%) at a debt auction overnight. The beginning of the ECB bond-buying will be the next catalyst for the markets.

Asian stock markets have generally risen this week, but a number of markets have had a holiday-shortened trading week, including India, Hong Kong and mainland China. The MSCI Asia Pacific Index is heading for its highest close in a week, on the back of a 4% rise in September due to speculation that China will add to stimulus measures, following moves by the ECB and central banks in the US and Japan, to ease monetary policy through quantitative easing. The Chinese market has been closed this week. In Japan the central bank is in a 2-day policy meeting, which last month boosted its asset-purchase program to YEN55 trillion ($US700 billion), as deepening pessimism among manufacturers is prompting the central bank to do more to combat deflation and address economic growth.

In commodities crude-oil prices have been volatile this week, but are looking to close the week around $US92 again, as prices rebounded strongly overnight on the back of geopolitical tensions in the Middle East. The gold price reached 11-month highs and is again trading around the $US1,800 level, as traders price in the global quantitative easing. Copper remains near 4-month highs.

The Australian market has broken the 4450 level as we predicted last week, and is looking to push towards the 4500 level, given the coordinated global central bank action designed to boost economic activity worldwide. The Australian market has edged higher, closing at the highest level since August 2011, as traders bet that the Reserve Bank of Australia will follow this week’s interest rate cut with another reduction in November. This would bring the cash rate to 3% which would be a 50-year low and the lowest since back at the height of the GFC.

In our market the growth-sensitive and defensive sectors have supported the market this week, as investors took their cue from the central banks and continued going long this market. The financials and materials sectors have resumed their upward path. The financial and info-tech sectors held around 12-month highs. The materials, industrials and energy sectors eased initially but have rebounded towards the end of the week, as trader optimism over the central bank stimulus reasserted itself.

Protection is extremely cheap at the moment and investors should have protection in place for their capital, and could look to put their money to work while reducing their risk by using options and warrants strategies. Remain attuned to the news from overseas, particularly from the eurozone, China, Japan and the US. Monitor the performance of Italian and Spanish borrowing costs, China-Japan tensions and the US dollar for a guide to the future direction of commodities and equities prices.

The S&P/ASX 200 index is currently trading at 4480 and is looking to close the week at 15-month highs. Key levels for the index next week will be 4400 and 4520, with 4450 the key short term pivot level. Traders are buying on the back of the global central bank stimulus, in anticipation that it will be enough to boost global growth.

Contact me at D2MX Trading on 1300 610 024 and I can help you trade, using a number of strategies that will give you the tools to navigate this market and help you improve your returns on investment.

Michael Hevern
Investment Adviser D2MX Advisory

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

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Weekly Market Wrap: Markets Ease As Investors Reassess

Friday, September 21st, 2012

Traders took some profits off the table this week, but markets remain at key multi-month and multi -year highs and are expected to drift higher into the end-of-quarter next week. Fund managers and retail investors are still under-invested in this market and we expect a chase for performance as we rule off the quarter. In Asia the latest round of data showed Chinese manufacturing heading for an eleventh month of contraction and Japanese exports fell in August, while data in Europe also showed eurozone services and manufacturing output fell to a 39-month low in September.

US stock markets have traded sideways and have closed modestly lower for three sessions this week, as the benchmark indexes test 2007 and 2000 highs for the Nasdaq. Investors turned their focus on to the data confirming slowing global growth, and have been taking some profits off the table. The S&P 500 is still up 16% for the year and last week climbed to its highest level since 2007, after the policy-setting Federal Open Market Committee (FOMC) announced a new round of quantitative easing (QE3) designed to boost growth and job creation, while forecasting that the benchmark interest rate will stay at a record low through until at least mid-2015. The Fed said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month in a third round of quantitative easing as it seeks to boost growth and reduce unemployment.

In European markets Spain has been in focus this week and the Financial Times has now reported European Union authorities are helping Spain compile an economic reform program, which will be seen as a positive, while Greek coalition leaders are continuing their discussions over a proposed EUR11.5 billion package of budget cuts. Traders have exhibited caution as concern for a deepening economic slowdown in China (and Japan) overshadowed optimism from the announcement from the Federal Reserve’s third round of quantitative easing (QE3) and the news that the European Central Bank policy makers agreed to implement an unlimited bond-buying program. Data in the eurozone also disappointed as a composite index for services and manufacturing activity in the eurozone fell in September more than economists had projected. The PMI reading fell to 45.9, its lowest since June 2009 (down from 46.3 last month). The trading volumes have been picking up as investors come to the realisation that they cannot fight the central banks’ massive liquidity injections and that they must be exposed to equities in a chase for yield. The Europe Stoxx 600 index has eased this week with falls led by the big caps, although it is still trading around 15-month highs and the index has jumped 17% from its June lows, as central banks moved to action.

Asian stock markets have backed off 4-month highs as Chinese and Japanese data disappointed. The MSCI Asia Pacific Index has fallen, but is still up 9% for the year. Earlier in the week this index was at its highest level since early May, on the back of central banks from Europe, the US and Japan taking action to stimulate growth going forward. The Bank of Japan (BoJ) unexpectedly expanded its asset purchasing program, the move to expand its monetary policy, by increasing the size of its asset purchase program to Y80 trillion (up from Y70 trillion) an increase of $US128 billion, but overnight the Finance Ministry reported that exports from the world’s third-largest economy declined 5.8 percent in August from a year earlier, which resulted in selling of the exporters. Elsewhere Japanese companies that do business in China sold-off as a territorial dispute sparked the worst diplomatic crisis between the two nations since 2005, putting at risk a trade relationship that has tripled in the past decade to more than $US340 billion.

The Chinese market continues to underperform and had it biggest 2-day drop in 6 months this week, on concerns over the escalating tensions with Japan and worsening economic slowdown. The Shanghai Composite has fallen over -7% this year on concerns the government is not loosening monetary policy or introducing stimulus policies fast enough to counter the slowdown in the economy. The Chinese central bank said it is placing more emphasis on price stability, boosting concerns it will delay easing monetary policy even as the economy slows and as inflation has accelerated for the first time in five months in August, and may limit any monetary easing. The Chinese market is down at levels not seen since February 2009, and the preliminary HSBC PMI reading of 47.8 (a number below 50 signals a contraction), showed Chinese manufacturing is contracting for an eleventh month in September.

In commodities crude-oil has fallen over 7% this week, while gold has held around 7-month highs and copper remains at 4-month highs.

The Australian market is looking to push towards the 4450 level, due to the fact that there has been a coordinated global central bank action to boost economic activity worldwide. The mining and mine services sectors have been in focus this week, as commodity prices pulled back and data showed slowing global growth.

In our market the defensive sectors have seen profit-taking, as investors switch into growth-sensitive sectors.

Telstra, Real Estate REITs and info-tech stocks have eased back after recently making new yearly highs. The financials and materials sectors have resumed their upward path. The financial sector is back at 12-month highs. The materials sectors continued higher, as we are see rotation into this sector in reaction to the central bank actions.

Investors should have protection in place for their capital, and could look to put their money to work, while reducing their risk by using options and warrants strategies. Remain attuned to the news from overseas, particularly from the eurozone, China and the US. Monitor the performance of Italian and Spanish borrowing costs, China and the US dollar for a guide to the future direction of commodities and equities prices.

The S&P/ASX 200 index is currently trading at 4411 and is looking to close the week higher again. Key levels for the index next week will be 4350 and 4450, with 4380 the key short term pivot level. Traders have received the news they wanted from the ECB and the US Fed (QE3) and now the BoJ in Japan, and are still watching for some response from the Chinese central bank.

Contact me at D2MX Trading on 1300 610 024 and I can help you trade using a number of strategies that will give you the tools to navigate this market and help you improve your returns on investment.

Michael Hevern
Investment Adviser D2MX Advisory

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

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Weekly Market Wrap: Markets Jump as Central Banks Deliver

Friday, September 14th, 2012

It was the ECB that delivered last week, after ECB President Mario Draghi unveiled an unlimited bond-buying program, but this week traders have been hanging out for an announcement from the US Federal Reserve, and Ben Bernanke has delivered with a third round of quantitative easing. In Asia however we are seeing mixed messages from the Chinese government regarding the need for further stimulus near-term.

US stock markets surged overnight, sending the S&P 500 Index to its highest level since 2007, and the Nasdaq to its highest since late 2000. The Dow Jones surged with all 30 stocks closing higher and in the broader market all 10 groups in the S&P 500 rose over 1 percent, led by financial and commodity-related sectors. The S&P 500 is only around 7 percent from reaching its record closing high from 2007 after rallying 16 percent this year.

Investors hit the BUY button after the Fed said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month as it seeks to boost growth and reduce unemployment. The Fed said it is in for the long haul and will continue its purchases of mortgage-backed securities, and undertake other asset purchases if the outlook for the labor market does not improve substantially. The Fed also extended its commitment to zero interest rates from 2014 into mid-2015. Operation Twist, the program to swap $US667 billion of short-term debt with longer-term securities to lengthen the average maturity of its holdings, will also continue.

Fed officials said economic growth will improve faster than they had earlier projected, as they upgraded their 2013 and 2014 estimates for gross domestic product. The Fed now expects the job market outlook to improve more swiftly by 2014, with unemployment forecast to fall to between 6.7 and 7.3 percent, (down from earlier projections of 7 to 7.7 percent) in their June projections. In 2015, unemployment is expected to fall to between 6 and 6.8 percent. The Fed also now expects growth will improve to 3 percent next year and up to 3.8 percent in 2014 (up from earlier estimates of 2.8 and 3.5 percent).

European stock markets have pushed to 14-month highs this week, but eased overnight as investors awaited a Federal Reserve decision on further stimulus measures. The three benchmark indexes traded higher this week, with the London FTSE recovering to end higher, while the French and German markets backed off 14-month highs. The UK FTSE index climbed to a 3-week high ahead of the US Federal Reserve’s policy statement in anticipation of another round of bond buying to spur economic growth. Traders bought financials early in the week, as they correctly anticipated that the German Federal Constitutional Court would not halt the country’s participation in the EUR500 billion European Stability Mechanism (ESM), the eurozone’s permanent bailout fund. Germany is contributing 27% of the monies to this ESM bailout fund. Growth-sensitive stocks have had a good run as well, after last week’s announcement from the ECB that it will target government bonds with maturities of one to three years, including longer dated debt that has a residual maturity of that length. The key to this program is that the purchases will be fully sterilised, meaning that the overall impact on the money supply will be neutral, and the ECB will not have seniority. European traders will get to react to the Fed announcement tonight.

Asian stock markets have been on the rise this week, in reaction to the ECB confirming its bond-buying program and in anticipation that the US Federal Reserve would announce another round of asset purchases at the end of its FOMC policy meeting. The MSCI Asia Pacific Index has recorded its longest winning streak since July, as traders bet that the US and Chinese central banks will act to kick up growth in the world’s two largest economies. The US Fed has delivered, however traders are getting mixed messages about the prospect of central bank easing in China, as the Xinhua News Agency reported an official saying that massive stimulus measures would be “detrimental” to sustainable domestic economic growth. This conflicts with a recent statement from Chinese Premier Wen Jiabao, speaking at the World Economic Forum, where he signaled that there is room for more fiscal and monetary policy to support growth, saying China still has “ample strength” to meet its economic goals for the year.

Commodity-related stocks have traded higher as copper and crude-oil trade at 4-month highs and gold prices have risen to their highest level since February. Traders will be reacting to the Fed’s announcement near-term, which should push stock prices higher.

The Australian market is looking to push towards the 4450 level, due to fact that there has been a coordinated global central bank action to spur on growth. The mining and mine services sector has recovered this week, as commodity prices continued higher in reaction to the central bank announcements.
In our market the defensive sectors have seen profit-taking, as investors switch into growth-sensitive sectors. Telstra, Real Estate REITs and health-care stocks have eased back after recently making new yearly highs. The utilities, financials and energy sectors have resumed their upward path. The financial sector is back at 12-month highs. The industrials and materials sectors bounced, as we are seeing rotation into these sectors in reaction to the central bank actions.

Investors should have protection in place for their capital, and could look to put their money to work, while reducing their risk by using options and warrants strategies. Remain attuned to the news from overseas, particularly from the eurozone, China and the US. Monitor the performance of Italian and Spanish borrowing costs, China and the US dollar for a guide to the future direction of commodities and equities prices.

The S&P/ASX 200 index is currently trading at 4383 and is looking to close the week strongly higher. Key levels for the index next week will be 4350 and 4450, with 4380 the key short term pivot level. Traders have received the news they wanted from the ECB and the US Fed (QE3), and are now watching for some response from the Chinese central bank.

Contact me at D2MX Trading on 1300 610 024 and I can help you trade, using a number of strategies that will give you the tools to navigate this market and help you improve your returns on investment.

Michael Hevern
Investment Adviser D2MX Advisory

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

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Weekly Market Wrap: Nerves Tested Over Impending Stimulus Action

Friday, August 24th, 2012

Traders continue to climb the wall of worry, but are becoming impatient over the time it is taking to see central bank action on further stimulus. US investors are getting mixed messages regarding the potential for QE3, as their market hovers around 4-year highs. In Europe the markets have been up for eleven consecutive weeks, but profit-takers have stepped in towards the end of the week.

US stock markets dropped to their lowest level in a week, as the market players test the weak hands. Indexes are hovering around 4-year highs, having closed higher for the past seven straight weeks, the longest stretch of weekly gains since January 2011. At its last meeting the Federal Reserve hinted at the potential for further monetary easing should the domestic economy deteriorate further, so traders will be looking to Chairman Bernanke to update the markets on his views at the forum meeting for central bankers in Jackson Hole, Wyoming, where he has signaled there may be a second round of bond buying by the Fed. The next meeting of the Federal Reserve is on 12 September.

The VIX volatility index, having reached 5-year lows last week, is edging higher to near 16, in a sign that investors are becoming more apprehensive about the state of the markets near-term.

European stock markets are starting to falter, backing off 12-month highs after being higher for the past eleven consecutive weeks. Investors appear to be taking profits ahead of bilateral meetings between the leaders of eurozone countries aimed at gauging their progress in tackling the fiscal crisis. German Chancellor Merkel said Europe is in one of its deepest crises, but the eurozone should emerge stronger in the end. She also signalled that Germany is willing to discuss a Greek request for more time to meet the terms of its international rescue (up to two years), leaving the door open to potential concessions. French President Hollande and Chancellor Merkel will meet with the Greek Prime Minister Antonis Samaras in Berlin tonight. The next ECB meeting will be held on 6 September, where it is anticipated that policy makers will deliver their so-called plan of action to address the worsening eurozone debt crisis. Traders lack the catalyst to continue buying until these meetings are underway.

Asian stock markets are ending the week on a negative tone. Markets turned to “risk-off” after HSBC’s preliminary China purchasing managers index (Flash PMI) for August showed a fall to 47.8, compared with a final reading of 49.3 in July. However investors remain hopeful that the slowing economy will prompt the Chinese government to intervene. Chinese export growth also plunged to 1 percent in July from a year earlier, after an 11.3 percent gain in June, while industrial production and lending were below economists’ forecasts. Additionally a report last week showed foreign direct investment in China declined 8.7 percent in July from a year earlier to $7.58 billion, the eighth drop in nine months and the smallest inflow since July 2010. The fact that Chinese manufacturing may contract at a faster pace in August, according to the Flash PMI data, is signaling that more monetary and fiscal stimulus may be needed to secure a second-half rebound in economic growth. The Asian markets continue to underperform.

In commodities, gold has rallied to a 4-month high, as the US dollar fell to a 2-month low and Treasury yields touched the lowest point in more than a week due to speculation the Federal Reserve will add to monetary stimulus. Crude-oil rose to a three-month high, extending its rally after rising above long-term technical resistance as the futures settled above its 200-day moving average for the first time since mid-May. Copper continues to bounce off 4-month lows.

The Australian market has is holding around 3-month highs, due to the prospect of coordinated global central bank action, but our mining and energy stocks are seeing some profit-taking after their 4-week rally, following the disappointing Chinese Flash PMI. 4300 is the current pivotal level and the 4260 level is the critical support level for next week.

In our market the defensive sectors have seen further profit taking, as traders lock in their dividends. Our earnings season has been mixed. Companies that disappoint are being punished through their share prices, with Telstra, Real Estate REITs and health-care stocks all easing again this week. The industrials, materials and energy sectors have also seen some profit-taking late in the week. The financial sector remains at 12-month highs. Traders are hanging out for news in the form of a coordinated effort towards monetary easing, but this will not happen until at least mid-September.

Investors should have protection in place for their capital, and could look to reduce their risk by using options and warrants strategies. Look to pick up value stocks in growth-sensitive sectors, when they reach your buy levels.

Remain attuned to the news from overseas, particularly from the eurozone, China and the US, and locally as the Australian reporting season continues. Monitor the performance of Italian and Spanish borrowing costs, China and the US dollar for a guide to the future direction of commodities and equities prices.

The S&P/ASX 200 index is currently trading at 4344 and is looking to close the week modestly lower. Key levels for the index next week will be 4260 and 4400, with 4300 the key short term pivot level.

Contact me at D2MX Trading on 1300 610 024 and I can help you trade, using a number of strategies that will give you the tools to navigate this market and help you boost your returns on investment.

Michael Hevern
Investment Adviser D2MX Trading

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

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