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The Dow was down 174 points on Thursday but we lost only 27.8 on the S&P/ASX 200. By 4 pm yesterday, European markets were tipped to go higher on comments from Fed boss Janet Yellen. What did she say?

First she was more bullish on the US economy. Second, she denied the December rate rise was a mistake. And third, she made it pretty clear that two rate rises for the Yanks are expected.

Adding to the commentary, the Japanese Finance Minister did some serious jawboning, promising action to stop the ruinous rise of the yen, especially against the greenback. Fortunately, our dollar didn’t get caught in the crossfire, only up a little at 75.37 US cents on Friday afternoon.

On Friday, our stock market ended at 4937.2 and as we ended last week at 4999.40, that’s a 62-point loss for the week.

Why has our stock market been so susceptible to gravity over the past 12 months? The answer rests on the hate session on our banks, the weakness for material stocks such as BHP and Rio and that damn Oz dollar hasn’t helped.

The queue to slug our banks reminds me of the line of people in the movie Airplane!, who smacked that poor female passenger who had a fear of flying and was crying out for support (if you need a refresher on this, go to https://www.youtube.com/watch?v=d1Cpc8Vw-2A).

Everyday, a new reason to sell the bank surfaces but not everyone sees it as the market has since mid-2015. “Over the last 30 years, they’ve rarely been as cheap as they are today,” said Julian Babarczy, head of Australian equities at Regal Funds Management (SMH).

But the Arrium voluntary administration and its potential half a billion dollar slug to local banks has got some analysts even more negative, as they look around for other left-field failures.

This collapse of the old OneSteel business could actually do the ‘Whyalla Wipe-Out’ that Craig Emerson jokingly sung about, as doom was predicted for mining because of the carbon tax (those with courage can revisit that at https://www.youtube.com/watch?v=L1pEt7bgY2U).

Arrium has joined the queue with Dick Smith, Slater and Gordon and others, which could be bad debts for the banks so there are some reasons for concerns on that score. Then there’s the housing boom ending and more demands from APRA for the banks to add to capital. And furthermore, until we saw our 3% economic growth number for the year to December, there were claims that we were slowing down, with some crackpots seeing a recession in their economic crystal balls.

However, all this might explain why markets have taken the CBA share price down from a high just over $95 to where it is at $70.76 yesterday. And remember, financials make up about 40% of our market cap or the index, so it easily explains why the S&P/ASX 200 index has had a shocker since April last year.

Throw in the misery for BHP and Rio this past 12 months and you can only hope that the experts, who are calling the worst is behind us for commodity prices, are right!

That said, at this stage, the overall market index charts are not offering enough promise that the worst is over. However, if there is a game changer event or development, those technical tracks can also change. So, what might those events be?

The April 17 oil producers’ meeting in Doha, Qatar could deliver a production freeze, which would stabilise or even raise prices, which has had positive effects on share prices. Then there is the next FOMC meeting on April 26-27 and we know that post pow-wow comments from Janet Yellen can be market-moving. Thankfully, she has learnt to say the right thing to markets.

Coming up next week, US earnings season starts and by early June, we should have a good idea of what the company profit outlook should be. I’m not expecting great news for US profits but the outlook statements will be closely watched. If there is a more positive view linked to a better than expected economy and a lower dollar, then a lot of the current negativity could be offset.

Then on June 23, the Brits vote on whether they stay in the EU and all the argy bargy ahead of this decision could easily unsettle markets, just as the Greek’s possible Grexit did last year. And all these market threats or opportunities happen in that notoriously dangerous market period, where “sell in May and runaway…”, can dominate stock markets.

Clearly, we’re entering a make or break period for the markets and our portfolios’ fortunes. I’d like to be 100% positive on stocks doing OK over the next six months but we’re entering a minefield. You know I think we have the capacity to finish in positive territory for the year. However, I also know this could be a bumpy, volatile ride because we’re depending on the team at OPEC, along with Russia, Iran, et al.

What I liked

• The Kuwait Governor at OPEC, who reckons the April 17 meeting of global oil producers will strike a deal to freeze production. How reliable are Kuwaiti oil officials? Certainly, oil prices spiked on the news, along with a run down of oil inventories in the US.
• The call by the Department of Industry, Innovation and Science that the rout for commodity prices is over!
• And this: “The worst of the commodity price collapse is probably already over for materials including metallurgical coal, aluminium, zinc, lead and gold, Credit Suisse analysts led by Matthew Hope wrote in a note dated Friday. The outlook for steel demand in China is also improving on the prospects of additional government infrastructure spending, the analysts wrote.” (SMH 8 April 2016)
• Oil prices up around 8% for the week. While I know it looks crazy rooting for higher prices, you have to understand that lower prices will play havoc on stocks.
• Janet Yellen got it right this week telling us that the US was not a “bubble economy” and that two rate rises look likely, which she wouldn’t be planning, if the economy was heading for a bust into recession.
• US consumer credit grew by US$17.22 billion in February, above forecasts centred on a US$14.74 billion rise. January credit was revised up from a gain of US$10.54bn to a US$14.9bn increase. This doesn’t look like a too weak economy!

What I didn’t like

• The Atlanta Fed’s GDPNow model says the US economy was set to grow at only 0.1% for the first quarter! It is a guess model of real GDP but I hope, like a lot of models, it’s wrong.
• This from Bloomberg: “Banks at Risk of Bad-Debt Blowout as Aussie Steelmaker Collapses.”
• The currency wars that are seeing the yen go higher as the US dollar falls, which is great for the Yanks but terrible for Japan, an important trading partner of ours.
• Australian economic data is starting to be less bullish than it was before we got the 3% growth number for the December quarter. They are still OK but not as strong, with the rising dollar and Canberra’s average performance not helping. Retail sales are a case in point, with sales flat in February after a 0.3% lift in January. Annual spending growth eased from 4% to 3.3% – the weakest annual growth in 2½ years!

We need to see a very good Budget on May 3.

Top stocks – how they fared

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The week in review

(click the blue text to read more)

• This week I told you what can help our stocks get to 5,900 this year and prove CMC Market’s Michael McCarthy right!
• Paul Rickard recapped on the performance of our model portfolios during March. Year to date, our income portfolio has outperformed the index by 2.75%.
• Christopher Demasi explained why TJX Companies (NYSE: TJX) and Ross Stores (NASDAQ: ROST) are two bargain retailers to consider.
• The brokers upgraded Tabcorp and Tatts Group. In our second broker report, Beadell Resources and RCR Tomlinson were upgraded while Aristocrat Leisure was among the downgrades.
• Our Super Stock Selectors made a contrarian call placing ANZ in the good books.
• Charlie Aitken explained what’s driving the outperformance of US equities.
• Tony Featherstone gave you three ways to play the beaten-down mining sector – Evolution Mining (EVN), AWE (AWE) and Monadelphous Group (MND).
• Tony Negline shared a recent legal case to illustrate the traps if you don’t have a binding death benefit nomination in place.
• And Cathryn van der Walt gave us a sneak peek into her very own SMSF.

What moved the market

• Investors questioned whether major oil producers will act together to freeze current output levels on April 17, making global oil prices (and stocks) slide.
• But crazy global oil price swings (crude gained 5% Wednesday and fell 1% Thursday) made for a choppy week on Wall Street. The local market played follow the leader.
• Our local banks got battered around, with allegations against Westpac for interest rate manipulations impacting investor sentiment.

The week ahead

Australia

• Monday April 11 – Housing finance (February)
• Tuesday April 12 – Credit and debit card lending (February)
• Tuesday April 12 – NAB Business survey (February)
• Wednesday April 13 – Consumer confidence (April)
• Wednesday April 13 – Lending finance (February)
• Wednesday April 13 – Dwelling starts (December quarter)
• Thursday April 14 – Employment/Unemployment (March)
• Friday April 15 – Financial Stability Review

Overseas

• Monday April 11 – China inflation (March)
• Tuesday April 12 – US Import and export prices (March)
• Tuesday April 12 – US NFIB business optimism (March)
• Wednesday April 13 – US producer prices (March)
• Wednesday April 13 – US retail sales (March)
• Wednesday April 13 – China trade (March)
• Thursday April 14 – US consumer prices (March)
• Friday April 15 – US consumer sentiment (April)
• Friday April 15 – US production (March)
• Friday April 15 – China GDP and monthly data (March)

Calls of the week

• The RBA left the cash rate at a record low of 2% for the 11th straight month.
• In this week’s SSR, Tony Featherstone tipped three stocks in the beaten down resource sector as an investment opportunity.
• Iceland’s PM Sigmundur David Gunnlaugsson made the call to fall on his sword following the revelation of offshore tax avoidance schemes in the Panama Paper leaks.
• And troubled steel and mining group Arrium went into voluntary administration after its lenders made the call to reject a bailout deal.

Food for thought

“The best way to predict the future is to create it.”

– Peter Drucker, US businessman

Last week’s TV roundup

• To explain how he’s investing right now for growth, Tim Samway of Hyperion Asset Management joins the show.
• John Julian of AMP Capital discusses investing in infrastructure in a highly volatile but low income world at the recent Switzer Investor Strategy Day.
• What’s needed for global equity markets to drive higher? George Boubouras of Contango Asset Management shares his insights.
• Switzer Super Report expert Tony Featherstone shares his outlook for bank dividends.
• And with the stock market looking like it’s in buy territory, where can investors find the best value? FN Arena’s Rudi Filapek-Vandyck joins the show.

Stocks shorted

ASIC releases data daily on the major short positions in the market. These are the stocks with the highest proportion of their ordinary shares that have been sold short, which could suggest investors are expecting the price to come down. The table also shows how this has changed compared to the week before.

This week one of the biggest movers was MMA Offshore, with a 1 percentage point increase in the proportion of its shares sold short to 7.89%. JB Hi-Fi followed with a 0.84 percentage point increase from 8.69% to 9.52%.

Source: ASIC

My favourite charts

Chinese tourists trump NZ!

CommSec has shown how tourists from greater China (China & Hong Kong) equalled 108,400 during February, beating our mates from across the ditch at 102,600. Maybe Charlie Aitken was on to something with his ‘structural growth themes’ including opportunities to capture the in-bound Chinese dollar.

Is Tesla driving the future for cars?

Take a look at the pre-orders for Tesla’s new electric car model! This chart shows how, as of April 2, Tesla received 276,000 pre-orders for its new model compared to a grand total of 107,000 car deliveries to customers from 2012-2015.

Top 5 most clicked on stories

• Charlie Aitken: Buffett’s dream investment
• Paul Rickard: Income portfolio surges in March
• Charlie Aitken: The real “big short”
• Peter Switzer: What can drive stocks to 5900 this year?
• Christopher Demasi: 2 bargain retail stocks

Recent Switzer Super Reports

• Thursday, 7 April, 2016: The new normal
• Monday, 4 April, 2016: Moving in the right direction

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.