Weekly Sector Charts

Comments by Ben O'Leary - Portfolio Manager

ASX 200 Heikin-Ashi chart – Threatened to break higher but the rally is evaporating, and the index is ultimately still trading sideways. Economic numbers a dulling the hopes of a V-shaped recovery despite the US getting back to work. Still waiting for the break one way or the other.

S&P 500 index – Looks as though the “big top” is in (at least for the moment) with the recent rally hitting some solid resistance. Just seen a MACD buy signal, but there isn’t a whole lot there to support it.

BANK SECTOR – Reversed its recent move and triggered an RSI sell signal in the process. Vic lockdowns and extensions of mortgage holidays the issue. 800,000 loans on mortgage holidays and countless businesses scrambling to make ends meet (or conceding defeat) with the extended lockdowns kills the idea that the banks have over provided in terms of provisions. Morgan Stanley wrote that the banks will take another hit, the only question is just how big it will be.

Would like to be able to buy CBA in particular for its dividend, but it’s not a safe bet until results pass and dividends are declared. There is still the possibility they could be deferred again. No certainty of income. Would buy for income if could guarantee. Certainly nothing sexy here.

Commonwealth Bank (CBA)

RESOURCES SECTOR – Pushing higher on the back of the continued iron ore strength. There is a risk of an iron ore bubble, but the Chinese economy sems stable(ish) and Brazil’s Vale mine looks like it could be under a cloud for some time. We’ve just seen a MACD buy signal, but the sector has also pushed into overbought territory. The big three (BHP, RIO and FMG) aren’t expensive on a PE basis and they might just be the only genuine income stocks in the market at the moment. There is a very good argument to buy for the income running into results, but with the market edgy and the stocks overbought we’ll be looking for buying opportunities in the coming weeks.

BHP Group (BHP)

Rio Tinto (RIO)

Fortescue Metals (FMG)

ALL TECH INDEX – FOMO still running rampant in the sector. RSI sell signal but a MACD buy. APT, REA, XRO and CPU make up 50% of the index. The stocks are being bought blindly by the herd as if they are all the business models, which obviously isn’t the case so you need to be careful with stock selection. APT, XRO and NXT are among the shining lights and genuine BL2TR stocks, but they certainly aren’t the only ones. PE’s generally high but there is enormous variance. If you’re holding you would be happy, but the sector is vulnerable a sentiment change (though no signs of that happening anytime soon).

Afterpay (APT)

Xero (XRO)

NextDC (NXT)

ENERGY SECTOR – On the nose again. A recovery play will present again at some point. More oversold than overbought at the moment but it’s not looking like it’s going to come into favour right at the moment. Plenty of headwinds in the medium term with global growth on hold.

HEALTHCARE SECTOR – RSI and Heikin-ashi sell signals. MACD sell signal incoming. Will lose money slower in a down market, but that is no reason to buy. CSL and COH both rolled over after looking like they were headed for a rebound.


Cochlear (COH)

GOLD SECTOR – Flying along on the money printing. Massively overbought now but there’s plenty of tailwinds behind it. You would be a very happy holder at the moment. Unfortunately we’ve missed it. PE’s of 25-30 on the big ones is right up there. Irrelevant yields.

REIT SECTOR – Taking a hit from the Vic lockdown and a longer work-from-home period. Plenty of reasons to be heading down at the moment. Happy to steer clear.

CONSUMER STAPLES SECTOR – Flying along despite a little RSI sell signal. PE’s getting a bit ritzy for what shouldn’t be that exciting of a sector. Would consider WOW and COL for the dividends coming into results. They’re pretty much priced to perfection so there is a bit of risk in it. Brokers don’t think they’re cheap.

Woolworths (WOW)

Coles (COL)

CONSUMER DISCRETIONARY SECTOR – RSI and Heikin-ashi sell signals. Topping out on plenty of the charts including WES, JBH and DMP. Prices generally way above broker forecasts. A few decent yields about that could be interesting leading into results season but requires stock-by-stock selection.

Wesfarmers (WES)

JB Hi-Fi (JBH)

Dominos Pizza (DMP)

INDUSTRIALS SECTOR – On the nose. Lots of CV-19 victims in there. The travel trade will have its day again, but it’s dead in the water for the time being with most of the travel names matching the technical profile of QAN. The likes of TCL won’t like extended lockdowns.

Qantas (QAN)

Transurban (TCL)

UTILITIES SECTOR – Trending sideways to down and looking boring as ever.

TELECOM SECTOR – Flying along. TLS broken up nicely and has its reasonable yield makes it attractive for income investors running into results season. Should be a fairly safe sector. Few fliers about (MAQ up 54% in a month) and the sector has just moved into overbought territory.

Telstra (TLS)

Macquarie Telecom (MAQ)

SMALL ORDINARIES INDEX – Trekking sideways and stuck in no man's land. Treading water heading into what will no doubt be a volatile results season in small-cap land.

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