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The past five trading days have been all Brexit with a bit of Fedexit as well, as the US central bank looks like it might have exited from being a rate riser, for the moment. And if you look at the S&P/ASX 200 index over the past year, you can see we have virtually exited investment – ‘investexit’ if you like – by going sideways and having extreme difficulties in going above the 5400 level.

But that’s only a one-sided view. The chart above also shows that the lowest we’ve gone is 4765.3, so the set of drivers that can take stocks up or down is good enough to take us up to 5400 but bad enough to force us down to around 4800 or so.

Of course, in April 2015, we nearly breached 6000, so there has been a real fall from grace and if you want to call this a bear market, it certainly hasn’t been a real grizzly one, though it has been scarier than a teddy bear, so maybe I’ll settle on an intoxicated, pretty cranky koala bear! (I know they’re not really a bear but neither is this cyclical bear market.)

As the chart above shows, the ups and downs have provided reasonable buying opportunities for dip buyers on the lows and profit takers on the highs but it has been frustrating for long-term ‘buy and hold’ investors. I guess it has been OK compared to term deposits and bond investors, if you average 5% in dividends plus franking credits, and that should be the goal for a lot of wealth builders: to create a portfolio that delivers that kind of baseline result. After that, you need to be able to ride the ups and downs of that damn thing called the stock market.

And, unfortunately, until Brexit is over next Thursday, we’re likely to be poised around these levels, unless the polls and bookies get too negative or too positive. So we’re on Brexit-watch and doesn’t it remind us of last year’s market anxiety of Grexit?

There’s also a two-day testimony of Fed boss, Janet Yellen, and every word she utters will be watched, analysed and speculated upon, with St. Louis Fed President James Bullard now saying that growth will only be around 2% so he’s tipping only one interest rate rise through to 2018! You’ve got to hope he’s wrong or else we’ll see Wall Street having difficulties spiking too much higher. It would also mean our currency is going to have fewer forces pushing it down but it could be suggesting that growth worldwide will remain like it has been – very disappointing!

Let’s hope Bullard is a bull-artist but next week in the US we’ll see a lot of economic data to test out his forecasting credentials, with home prices, home sales, the leading index, manufacturing and durable goods data released.

On the local front, there’s not much statistics-wise to move stocks so Brexit could make or break a market that now has fallen for three weeks in a row, with the S&P/ASX 200 index down 150 points (or 2.8%) for the week.

What I liked

• The bookies odds on Bremain over Brexit – 1/2 versus 13/8, which makes Brexit the long shot and Bremain the odds on favourite.
• The NAB business conditions index rose from +9.7 points to +10.1 points in May (long-term average +4.8 points). But the business confidence index eased from +5.3 points to +2.7 points (long-term average +5.8 points), however, elections can do that and anyway business conditions readings are more important for economic growth.
• The Westpac/Melbourne Institute survey of consumer sentiment eased 1% in June but it rose by a big 8.5% in May by 102.2.
• Over the year to May, a record 1,172,402 new vehicles were sold, including a record 427,444 sports utility vehicles or four-wheel drive vehicles.
• The Reserve Bank has found that retailers have been actively cutting costs rather than putting up prices in response to stronger competition, which means the deflation figure is more about competition than a demand problem in the economy.
• Banks did well in Europe as Brexit enthusiasm waned, which suggests a ‘no’ vote to an exit will be good for financials.
• The Philadelphia Federal Reserve index rose from minus 1.8 points to +4.7 points in June, which is a pretty good growth sign.

What I didn’t like

• This headline from the UK’s Independent website: “EU referendum: Poll reveals 10-point swing towards Brexit as campaign enters final stages!”
• The Brit MP Jo Cox’s shooting! Terrible stuff.
• If Brexit can spook stock markets, then what might the thought of Donald Trump do as a potential president?
• Local unemployment at 5.7% and 17,900 jobs, compared to the 15,000 forecast, was good without being great but it certainly kept the growth pessimists contained.
• Chinese economic data was underwhelming for an optimist like yours truly but it wasn’t really bad.
• The fall in bond yields saw German 10-year yields fall below zero for the first time and Australian 10-year bond yields fall briefly below 2% to a new record low. When yields rise, growth is coming!
• Nearly all implications of Brexit getting up, with the possibility of it leading to a rush to the greenback, which pushes down commodity prices and that then takes our dollar, as well as our stock market, down, like we saw in January. Brexit will be seen as a growth and confidence killer!
• The Bank of Japan’s meeting, which suggested the BOJ is out of ideas and the yen spiked. These guys need a weaker currency.
• The Bullard call – I don’t want his US economic growth of 2% to be right.

Top stocks – how they fared

The week in review

(click the blue text to read more)

• This week, I explained just what a Brexit slug might do to the market.
• Tony Featherstone went shopping for retail stocks with value, and the companies he suggested might surprise you!
• Charlie Aitken explained how you might consider playing the outcome of the Brexit vote, and said next week could be full of opportunities.
• Roger Montgomery said circuit board designer Altium is a high quality software provider with a demonstrated ability to grow its market share.
• Tony Negline outlined why the Government’s proposed changes to caps may change trustees’ plans for putting money in super from the sale of assets like property.
• And the brokers placed Graincorp and JB Hi-Fi in their good books, while Medibank Private copped a downgrade.

What moved the market

• Polls showing increased support for Brexit next week weighed on global share markets. Any one sick of hearing Brexit yet?
• Gold and the yen – considered safe-haven assets – were supported by investors planning for Britain’s possible departure.
• US share markets had a modest loss after US Fed Chair Janet Yellen appeared less confident on the US economy and left rates on hold at the latest Fed meeting.
• The local energy sector was knocked about as oil prices slipped below $US50 a barrel.

The week ahead

Australia

• Tuesday June 21 – Reserve Bank Board minutes
• Tuesday June 21 – House price index (March quarter)
• Tuesday June 21 – Speech by Reserve Bank official
• Wednesday June 22 – Vacancy Report (May)
• Thursday June 23 – Population (December quarter)
• Thursday June 23 – Detailed employment (May)

Overseas

• Tuesday June 21 – US Federal Reserve testimony
• Wednesday June 22 – US FHFA home prices (April)
• Wednesday June 22 – US Existing home sales (May)
• Thursday June 23 – UK “Brexit” referendum
• Thursday June 23 – US New home sales (May)
• Thursday June 23 – US Leading index (May)
• Thursday June 23 – ‘Flash’ manufacturing index
• Friday June 24 – US Durable goods orders (May)

Calls of the week

• James Packer’s Crown Resorts made the call to spin off its international businesses and move to a new dividend policy, with 100% of normalised profits to be paid as dividends. A bigger ring for Mariah?
• Fed Boss Janet Yellen made the call to keep the cash-rate rocket at bay on the back of weaker jobs growth concerns and the Brexit vote. Six Fed voting members now expect only one rise this year, but the median expectation across these voters is still two hikes.
• Tech giant Microsoft made their biggest ever purchase after scooping up LinkedIn for $35 billion!
• And Tony Featherstone says finding value in the retail sector could be for the patient – yep, he mentioned Woolies!

Food for thought

“It’s the repetition of affirmations that leads to belief. And once that belief becomes a deep conviction, things begin to happen.”

– Muhammad Ali, American Olympic and professional boxer

Last week’s TV roundup

• For a run down on the market sell-off and how to sell the losers in your portfolio tax-effectively, Raymond Chan from Morgans joins the show.
• With concerns about Brexit taking over the market, Investors Mutual’s Anton Tagliaferro joins the show to share how he is playing the market right now.
• Gary Stone reveals what the charts are saying about the market locally and globally.
• And to talk about what stocks are in and out of favour with the brokers, FNArena’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 Oil Search, with a 0.53 percentage point increase in the amount of its shares sold short to 8.71%. Myer went the other way with a 3.33 percentage point decrease in the amount of its shares sold short from 16.43% to 13.09%.

Source: ASIC

My favourite charts

An overlooked positive business story!

The NAB business conditions index rose from 9.7 points to 10.1 points in May. That’s miles ahead of its long-term average of 4.8 points. Now because business confidence eased from 5.3 points to 2.7 points over the same period, the former good news story was overlooked. NAB says the steady reading suggests the positive non-mining momentum has continued into the second quarter. That’s good news for the economy and Turnbull.

Gary’s take on the ASX 200

Chartist extraordinaire Gary Stone says the ASX200 has reached a resistance zone, tying into the geopolitical concerns at the moment, and there will be another test of that resistance level next week!

Top 5 most clicked on stories

• Charlie Aitken: Brexit or Bremain? How to play it
• Peter Switzer: Brexit’s bashing stocks – how worried should you be?
• Charlie Aitken: Bonded to sustainable dividend yield
• Rudi Filapek-Vandyck: Buy, Sell, Hold – what the brokers say
• Roger Montgomery: Circuit board designer rides big tech wave

Recent Switzer Super Reports

• Thursday 16 June 2016: Brexit uncertainty

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.