(FRIDAY 23RD SEPTEMBER- 08:11 - JAMES GERRISH)...A big round of selling on the mkt overnight with the DOW JONES off -391pts while the S&P 500 was off -3.1%. Locally, the SPI FUTURES are pricing a drop of -76pts when trading kicks off here this morning.
Technically, The DOW made a marginal new low overnight and closed above it. Traditionally, this is a positive sign for a mkt reversal (I know you'll think its a stretch but thats the way mkts tend to move during a low). The DOW did finish off 180pts from its low.
Overnight, the selling was fierce and broad based and was a ringing dis-endorsement of the Feds 'Operation Twitst' that it launched 2 nights ago. I think the MKT now assumes that the FED is out of all forms of ammunition to support growth. I'd liken it to the Fed trying to kill an elephant with a slug gun..all it does is p**s the beast off! It looked like the mkt was a very annoyed beast overnight!
Resource stocks are certainly on the nose at the moment and we're likely to see BHP/RIO retest those recent lows set about 6 weeks ago. We've actually seen resource stocks anticipating a fall in the underlying raw material prices for a while now, and it seems like its starting to play out. This is largely based on the expectations for softer global growth which we saw from the IMF but more importantly from Fed Treasurer Ben Benanke when he justified his recent move.
The commodities index is a pretty interesting starting point overnight and shows disinterest in anything growth related.
Other charts worth a look below....
MY VIEW
Today - be a buyer rather than a seller! We retain our view that the market is basing out given the technical structures that we're seeing + the extreme bearishness across the board. One word of note however is that resource related stocks will be higher risk in an environment of lower global growth. Conservative investors can use days like this to buy high yielding equities + those that will benefit from a pullback in the AUD - not dump stocks on a whim!
We bought Computershare (CPU) recently. We continue to like this stock even more so with a pullback in the AUD. CSL should benefit from the AUD as will QBE, RHC, RMD, COH etc.
LYNAS (LYC) - some briefthoughts from Frank Carpenter over at Patersons.
Lynas have copped a well-publicised wallop the last 2 sessions in reaction to the price fall of Molycorp.
The price is moving toward 2 points of Technical support
1. The 62% Fibonacci from the 7.5c Feb 09 low to the $2.70 last April high is $1.08
2. Price will fill the gap @ $1.09 made back in August last yr
Lynas is now trading at a PE of 6.6x FY13 and 3.3x FY14 earnings on our conservative forecast prices. Using only half of current spot ($80) it becomes 2.7x and 1.4x respectively. Accordingly we retain our BUY recommendation with a price target of $2.90 per share.
LYC reports today.
MODEL PORTFOLIO UPDATES
We're going to buy FWD, MTS, ANZ, CBA today.
AUSTRALIAN STOCK PRICES OVERNIGHT
In New York, News Corp fell by US$0.47 to US$15.75, equivalent to A$16.16, A$0.06 above its last close on the ASX.
ResMed fell by US$0.72 to US$27.90, equivalent to A$2.86, A$0.04 below its last close on the ASX.
In London, Rio Tinto fell 366.0 pence to £30.23, A$5.76 lower in Australian currency terms.
BHP-Billiton fell 157.0 pence to £17.32, A$2.47 lower in Australian currency terms.
Henderson Group Plc fell 9.3 pence to £1.09, A$0.15 lower in Australian currency terms.
