Sheriff of Nottingham
11.56 am The ASX 200 is 0.4% lower with the losses probably accentuated by a delayed reaction to the franking rebate proposal. The major banks are down around 1% and the selling has developed a life of its own because Labor is back pedalling at pace now that it has become apparent that their role is more Sheriff of Nottingham than Robin Hood.
The best performer of my stocks is Sydney Airport which does not pay franked dividends. I've added more at 670 and it's an obvious target for rotation out of the banks. Otherwise RSG has traded up to 122.5 which, tentatively, confirms the end of the correction and implies a move to 128-130 in a 5th wave of this swing which started from a base of 106.5 on Feb 22nd.
The worst performer is AWC which is 4 cents lower at 227. This is where I thought it could go if there was a second leg to the correction. I'm annoyed with myself because there was no need to buy the first pop up on Monday because the likelihood was always of a second leg and that's assuming that my scenario of a higher low is correct. The upshot is that I can't really add more here without any confirmation and I'm sitting on a long with quite a distant stop. Sloppy.
NXT is down 4 or 5 but really not doing too much. My feeling is it can rally well with any bounce in the market and maybe we'll get that now that 5900 has been tested again but my sense is that this third test may ultimately fail so I need to watch closely here.
However, the franked dividend paying stocks that are under pressure are distorting the market so it's not as bleak as it seems. That's backed up by the performance of the small caps which have mostly edged higher, eg BUB, CLQ, TAW.
1.40 pm BHP is looking very good here. There's been a deep correction from the big breakout in mid December (aided by the recent ex dividend) and the stock has held 2800 and looks like making a higher low. It has the added upside of cash coming in from the potential shale sale and is a prime candidate for special dividends to pay out franking in an environment where franking is under close scrutiny.
The market has recovered most of the losses, just down 7 or 8 points now so the test of 5900 - low was 5906 - is holding today.
3.19 pm I stopped out of AWC at 229. It's playing out as I thought but there really is no buy signal and it's by no means the most compelling trade around so better to accept the error and move on. SYD is disappointing and has ground lower to 667. Transurban is down 1.1% too. It seems that every dividend paying stock is getting thrown out for now and the question of franking will be assessed at a later date. Interestingly, expectations for a rate rise in Australia are starting to be shifted back to early next year while US bonds and inflation expectations are also moving lower so the incentive to hold yield stocks should be stronger.
3.45 pm I bought some CLQ at 125.5 the other day and ended up averaging that down to 123 as the stock chopped around. The position size is the same but today is showing good signs with a rise of 5% to 129. I'd still like to add to this position and some movement out of this range would encourage me to do so.
Staying with the small caps, I'm thinking of buying a few Mesoblast. They ran strongly after the result and have eased lower. Today was the first day to break the previous day's high in this retracement. A minor signal and I'll buy a small amount accordingly.
I sold half of yesterday's momentum play in TAW at 51 and missed selling the balance. The stock is now down 1 on the day to 49 but the momentum hasn't faded too much so I'll give it till tomorrow for the rest.
4.22 pm Not much changed by the end of the day although the market slipped back to close down 14 at 5921. Another losing day in the large caps with losses trimmed by gains in the smalls. The net result was pretty minor. I can't say I'm particularly bullish about the index but it set up as if we can expect a minor rally tomorrow. It was the third day of the royal commission and that's a recipe for negative headlines but it will also wear off after a while. Asian markets are recovering, Japan and China are now flat after being down 3 quarters of a percent early and US futures have followed suit.
The best performer of my stocks is Sydney Airport which does not pay franked dividends. I've added more at 670 and it's an obvious target for rotation out of the banks. Otherwise RSG has traded up to 122.5 which, tentatively, confirms the end of the correction and implies a move to 128-130 in a 5th wave of this swing which started from a base of 106.5 on Feb 22nd.
However, the franked dividend paying stocks that are under pressure are distorting the market so it's not as bleak as it seems. That's backed up by the performance of the small caps which have mostly edged higher, eg BUB, CLQ, TAW.
1.40 pm BHP is looking very good here. There's been a deep correction from the big breakout in mid December (aided by the recent ex dividend) and the stock has held 2800 and looks like making a higher low. It has the added upside of cash coming in from the potential shale sale and is a prime candidate for special dividends to pay out franking in an environment where franking is under close scrutiny.
3.19 pm I stopped out of AWC at 229. It's playing out as I thought but there really is no buy signal and it's by no means the most compelling trade around so better to accept the error and move on. SYD is disappointing and has ground lower to 667. Transurban is down 1.1% too. It seems that every dividend paying stock is getting thrown out for now and the question of franking will be assessed at a later date. Interestingly, expectations for a rate rise in Australia are starting to be shifted back to early next year while US bonds and inflation expectations are also moving lower so the incentive to hold yield stocks should be stronger.
3.45 pm I bought some CLQ at 125.5 the other day and ended up averaging that down to 123 as the stock chopped around. The position size is the same but today is showing good signs with a rise of 5% to 129. I'd still like to add to this position and some movement out of this range would encourage me to do so.
4.22 pm Not much changed by the end of the day although the market slipped back to close down 14 at 5921. Another losing day in the large caps with losses trimmed by gains in the smalls. The net result was pretty minor. I can't say I'm particularly bullish about the index but it set up as if we can expect a minor rally tomorrow. It was the third day of the royal commission and that's a recipe for negative headlines but it will also wear off after a while. Asian markets are recovering, Japan and China are now flat after being down 3 quarters of a percent early and US futures have followed suit.
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