Wednesday's Weekly Wrap
Economy and Indices
The Australian market was flat for the 10th week in a row; still within the same tight, 120-point trading range of the last 13 weeks.
Telcos are rallying the most off the back of Telstra which has been touted as ‘sell the rumour’ and investors are ready to ‘buy the fact’ on the dividend news.
Clients of many years will know that in times like this we look for the market to fall, to capitulate on the old investment themes. As all seems lost, we look for the next market leaders to emerge from the ashes. Within those ashes, we find the next market leaders to invest in.
At this stage – we lighten our exposure and wait for our time to strike.
Leading Sectors This Week
Telcos +4.4%
Consumer Staples +0.7%
Bottom Sectors
Consumer Discretionary (retail) -1.4%
Utilities -2.7%
Segments this Week
Mid-Caps are the weakest this week -0.4%
Emerging Companies second worst -0.2%
The rest of the market are travelling together with negligible movements for the week.
Some of the stand outs were mentioned in the most recent episode of Talking Stock.
Six Month Trends
Over the last six months Mid-Caps are still the strongest segment, although this has fallen to only +6%.
The leaders in this Mid-Cap segment have been Bluescope Steel (BSL), Resmed (RMD), Cimic (CIM) and Aristocrat (ALL). However, these leaders have succumbed to the lacklustre AU market performance, and most have fallen back from their recent highs.
For insights as to whether these top performing, and ‘expensive’, companies can continue listen to my interview with Rudi Filapek-Vandyk.
Market Trends
Emerging Companies (the smallest index on the ASX) have been the worst segment, down -13% at one stage.
After months of a sideways market, the industry groups of leaders are less evident. However, there are still top performing shares as discussed yesterday in Talking Stock.
Outlook
An important point to note is that these sectors are the market leaders and the leaders are falling – which is not a promising sign.
Following a few reports and critical timings of technical trading indicators, there is growing concern for the Australian Banks, Miners and overall market - as discussed here with Gary Glover.
While there is no conviction in the current market leaders, we’re keeping trading positions light and waiting for a wash-out or market fall. After such events, we look for the new leaders to emerge from the ashes because, statistically, that’s when our approach to markets generate the best returns.
More
For insights on how to use these trends and themes within a portfolio, watch The Portfolio Series here.
Disney is divorcing Neflix. To see how your viewing patterns of TV, movie and news has changed the world listen to this interview yesterday with Kevin Hua from AtlasTrend.
