Online Stockmarket Trading Update

Stock markets ground ever higher this week, with the US markets at all-time highs and the German markets also within sight of their all-time highs, as central bank stimulus will continue into the foreseeable future.

Protection is still cheap and this is supporting the up-move. The bears continue to make their presence known in the resources sector and sold down the Chinese market again this week, which is now down -7% from its recent high.

Markets remain at multi-year highs, with many markets holding the break outs from their recent trading ranges. Market volatility is contracting, as investors are holding their protection in place to hedge their recent gains. The Australian market is looking to close down for the week, dragged down by the materials sector.

In today’s Analyst’s Eye we explain how you can identify where the big money is positioned in the market, using a simple system in “Show Me The Money“.

In the US, markets continued higher this week with the Dow Jones up for a tenth session, marking its longest winning streak since November 1996 and making new all-time highs again. The S&P500 index is within 2 points of its record highs, while the volatility edged towards its lowest levels in six years. The three benchmark indexes held on to recent gains this week, with the Dow Jones up 10% for the year. Trader sentiment has been boosted by weekly jobs data continuing to improve, as first-time jobless claims fell by 10,000 to 332,000, the least since mid-January and the four-week average has now declined to a five-year low. Earlier, retail sales enjoyed their largest increase in five months, as the Commerce Department figures showed a 1.1 percent advance in retail sales in February, more than double the forecasts (up from 0.2 percent in January).

European stock markets have held on to their recent breakouts and are trading at new 4 1/2 year highs. Traders are looking for positive outcomes from the region’s two-day leaders summit in Brussels, where eurozone finance ministers meet to discuss a bailout for Cyprus and policy makers may even loosen austerity measures, as the recession and mounting unemployment in southern Europe outweighs the eurozone debt crisis issues in the near-term. In the UK the FTSE advanced, extending its highest level in over five years, led by the retailers. In Germany the market broke above the 8,050 level and is approaching all-time highs.

Asian stock markets have generally consolidated this week, but Japan continued higher. The MSCI Asia Pacific Index is up 4% for the year and is still holding around levels not seen since August 2011. The regional benchmark index has hit a 19-month high this week. The Chinese and Hong Kong markets found some support, after their recent sell-off due to comments from the Chinese central bank chief, who said the bank is on “high alert” for inflation. Recent data showed inflation accelerated in February, while industrial output had its weakest start to a year since 2009 and lending and retail sales growth slowed.

Chinese developers and miners weighed on the markets as the People’s Bank Governor said monetary policy is “no longer relaxed”. The markets have struggled since the government moved to cool off the property sector and this week the Shenzhen land authorities will not approve the sale of new property projects with higher prices. The Shanghai Composite Index has lost 7 percent since its February high, due to concerns that the government will tighten monetary policy at the same time as economic expansion slows.

In Japan the Nikkei 225 Stock Average is the best performing developed market benchmark index this year, advancing after the lower house endorsed Prime Minister Abe’s nominees for the Bank of Japan’s leadership, who are expected to support a pro-stimulus policy for central bank. The Japanese the market is up 43% since its November lows.

The Aussie market has exhibited some volatility again this week, but is still trading around 4 ½ year highs. The ASX is looking to close down for the week, after having a consistent string of gains for fourteen of the past seventeen weeks, with the All Ords hovering around the 5100 level. The ASX market is testing the 20 day moving average, which has not been broken since the up-move began last November.

The ASX200 has tested the 5030 level near-term and has bounced again today. It is time to get your protection in place if you have not already done so.

The main domestic news this week has been the employment report which showed signs the economy was gathering pace with 71,500 jobs added over February, however drilling down we see that part-time employment jumped a sharp 54,000, while full-time employment only rose 18,000 in February. The market was weaker on the news, as economists were prompted to push out their dates for the next RBA rate rise.

Key levels for the ASX200 index next week will again be 5000 and 5180, with 5080 the key short term pivot level. Volatility is picking up, but is still relatively cheap and affords cheap protection for your portfolio. We are closing down from a new weekly high, as traders are starting to be a little more cautious given the spectacular run in stocks this year. The materials sector has been the major drag on the market this week, down -2.5%, but we are also seeing profit-taking in the banks and the defensive sectors, with the banking index having its first down week since November.

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

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.

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

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.