Exiting Gold Portfolios in 2013

Invast Insights

Week Commencing December 9, 2013

www.invast.com.au | 1800 468 278

This week we look at the following topics:

1.0 Final publication for 2013

2.0 Portfolio review- Exiting gold

3.0 Our thoughts on the RBA decision

4.0 Technical analysis outlook into Christmas and NYE

5.0 Weekly economic calendar



1.0 Final publication for 2013

This is the final publication for the year, our 15th Issue since launching in late

August. Vito Henjoto and I hope you have found it useful and our pledge is to

always evolve this service to help improve your investment and trading

returns.

I would like to specifically thank Ashley Jessen – Invast’s Director of

Communications – for his tireless efforts in making this publication possible.

We end the year by looking over our three model portfolios and providing an

update on the major currency pairs leading into the end of December. It’s

great to see our Wealth Creation portfolio up 16.8% since inception just three

months ago.

While this is the last Invast Insights issue for the year, we won’t be resting.

Instead we will be working hard over the holiday period to publish our 2014


markets outlook guide – covering currency, commodity and stock markets

globally. These will be available in mid to late January. On behalf of all the

Invast staff we wish you, our clients, a happy and safe holiday period and the

very best in success for markets in 2014. It has been a pleasure to serve you.

Best regards,

Peter Esho – Chief Market Analyst


2.0 Portfolio review- Exiting gold

We end the year with all three of our model portfolios in positive territory,

despite the turbulent market. It has been disappointing to see gains in our

Wealth Preservation portfolio evaporate in November but the purpose of the

portfolio is described in the title – preservation and continuity. The list of

quality names and huge diversification through two exchange traded fund

products in Australia and Japan, means we can go to sleep at night not

having to worry. Our Wealth Creation portfolio has exceeded our expectations

and remains in standout territory despite getting our call on the gold price

wrong. As we wrote last week, our view on gold has been updated and we

aren’t prepared to fight the market – the downward spiral has been savage on

gold stocks. We have cut our long gold position for a modest loss but

maintain our short S&P500 position. Exiting the gold position gives us a nice

cash balance of around $9,477 in our Wealth Creation portfolio, which we will

deploy next year in three potential stocks to be mentioned below.


The Wealth Creation portfolio has delivered a comfortable 16.8% return since

inception – the standout being our holding in Adslot (ADJ). With the sale of

our gold position, we now have $9,477 in cash to deploy. We are looking at

acquiring either Ellex Medical Lasers (ELX) or a business which has recently

emerged on our radar called Nearmap (NEA). The choice will come down to

one of these two businesses and we will make up our mind in the New Year.

For now, sitting on cash isn’t such a bad option with markets looking volatile

and turbulent.


It is disappointing to see the Wealth Preservation portfolio give away its recent

gains, but the fact that it remains in positive territory with an excellent

diversification profile provides huge comfort. We aren’t looking at changing

anything in the portfolio for the time being, Westfield’s (WDC) decision to

separate its Australian assets from its global portfolio is a further sign that it is

ready to start developing globally. The new vehicle will remain a cornerstone

investment in this portfolio with a fantastic outlook for many more years.


The Drawdown Phase Portfolio continues to provide income certainty; the one

big disappointment has been the performance of AMP over the past month

despite banking a fully franked 11.5 cents per share dividend since inception.

We are inclined to remove AMP if it continues to fall over the New Year period

and replace it with AMP income securities once they commence trading on the

market. AMP Notes 2 as they are called provide 2.65% margin above the

benchmark cash rate to holders, which is fairly attractive. We’ll make the

decision once the notes are trading to evaluate the appropriateness of their

yield to maturity relative to fully franked dividends from the head stock.


3.0 Our thoughts on the RBA decision

We published the following comments as our initial impressions following the

Reserve Bank of Australia’s (RBA) decision to maintain interest rates on hold at

2.5% last week.

The RBA goes into 2014 with a close eye on jobs, knowing very well that the

economic outlook for Australia remains fragile. This statement was always

going to sound cautious so it doesn't come as a complete surprise - but the

focus on the slowdown in the mining space cannot be understated. There is

the prospect for one more cut in the first quarter of 2014.

On the currency front, Invast still sees the Australian dollar falling into the mid

80 US cent range in 2014. The most important factor driving this will be a

gradual revaluation in the US dollar as the world's largest economy continues

to emerge from its recent slumber and the Federal Reserve looks to taper on

its bond purchase. Everybody wants a cheap currency, including Glenn

Stevens.


We think the Fed will commence tapering in March as opposed to December -

the Fed still needs to see a US non-farm job print in the order of 300,000 in

order for the unemployment rate to come back towards its 6.5% target.

Meanwhile, the RBA knows very well the importance of unemployment rising

in Australia and for us, the jobs numbers are the key swing indicators in what

the RBA does next.

Bottom line: Regardless of what the RBA does next, investors unhappy with

cash term deposits are unlikely to see a drastic improvement in cash rates for

most of 2014. Low interest rates are here to stay - our focus remains finding

the opportunities between what looks to be very expensive and over bought

financial stocks and heavily discarded but vulnerable resource companies.

The full fallout from this year's resource sector contraction is still yet to

completely pan out, we have only seen a slight glimpse of this in the recent

GDP numbers which showed the economy is running below trend at 2.3%

year on year growth.


Watch the video of our initial impressions here: www.youtube.com/watch?v=2b3diA3ZNBY

http://www.youtube.com/watch?v=2b3diA3ZNBY


4.0 Technical analysis outlook into Christmas and NYE

Over the next couple of pages are our key technical levels to help you

through the holiday period. The charts below can be a little difficult to format,

so please zoom in to get the full detail. Over the next few pages we cover our

views on:

• Aussie 200 Index;

• Nikkei 225 Index;

• S&P 500 Index; and

• USDJPY Currency Pair

AUS200 Index: We expect 5427 to cap the market in Q1 2014. This is the 61.8%

Fibonacci Retracement of the GFC fall. AUS200 is overdue for a technical

correction, and we see the index retreating towards 5000 - 4900 in 2014,

before any attempts higher is feasible. 5250 will act as the immediate support


for the index. A monthly close below this level could trigger further correction

towards 4782 - 4926. As long as price stays above 4782, a move down in

AUS200 will still be considered a technical correction, and long term up-trend

is intact.



Nikkei 225 Index: One of the best performing indices is quickly approaching

technical resistance at 16000. This level is not only a psychological barrier, but

also 78.6% Fibonacci retracement of the fall during GFC. Leading into 2014,

15500 - 15600, which is the 23.6% Fibonacci retracement of the latest rally; are

"the" levels to watch.

This range is key support for the index, as a weekly close below this range

could trigger a major correction in the market towards 14250 and 13800.

Nikkei needs a proper correction before the index could continue towards

17000. As such, we anticipate a pullback in Q1 2014.




S&P500 Index: The benchmark index continues to grind higher in 2013. As a

matter of fact there have been no major corrections since 2011. We do want to

point out that this could change in the near future.

Most traders are going to tread cautiously as the index reaches uncharted

territory. In the past two years, price responded to Fibonacci retracement

levels and so there is a high chance price could stall around 1825. 1825 is the

first Fibonacci extension in this uncharted territory and a lot of traders are

likely to use this as guidance. As such we expect some profit taking to occur

around 1825, and for the index to correct the overbought condition it is in.

Should the market continues to grind beyond 1825, the next identifiable

extension is the 161.8% Fibonacci extension located at 2135.

We expect a correction towards 1385 in 2014 before further progress towards

2135 can be made.



US30 Index: Very similar to S&P500, the US30 is in uncharted territory going in

to 2014, there are 2 levels all traders and investors should be cautious about.

First is the 127.2% Fibonacci extension from the GFC fall at 16285, this is the

immediate resistance for the index and we are literally within reach of this

level. A rejection around this level on the monthly chart could signal the end

of the rally. Should the pair manage to track beyond this level, then a move

towards the next extension at 18942-19000 is not out of the question.

We don't think this is possible without any correction in the market. As such

we expect a correction towards 12550 before the index can progress towards

19000. There are several correction targets while these corrections are massive

in range, it is safe to know that the uptrend will remain intact (technically) as

long as 10500 holds.

We anticipate the correction to occur in the first half of 2014, with the index

continuing its push higher in the second half of 2014.



USDJPY Currency: Yen's depreciation in the past 2 years seems overdone, and

while fundamentals still support the notion for weaker Yen in the future;

technically speaking it is not feasible without a correction. The pair currently

remains traded below 103.25, May 2013 high and the immediate resistance for

the pair. On the downside 101.85 acts as key support for the pair and could be

the key trigger for a correction.

A daily close below this level could trigger a technical correction in USD/JPY

towards 100.00 and 99.00 (50% and 61.8% Fibonacci retracement of the

current rally).



We think the correction is already underway, considering the formation of a

dark cloud cover on the daily chart this week. Overall trend for the USD/JPY

remains to the upside, and we expect Yen to weaken further in 2014, but only

after a quick technical correction. On the technical front, major markets are

due for a technical correction in 2014. Considering the recovery rally in the

past 2 years, we expect the correction to be significant and might even spark

panic in the market. However we consider any major drop in 2014, to be a

technical correction and could pave the way for opportunities in the market

once the correction is completed.


5.0 Weekly economic calendar



For more trading insights and economic calendar updates, visit our website.

http://www.invast.com.au/resources/economic-calendar.aspx


7.0 Disclaimer

Please note that you are receiving this report complimentary from Invast Financial Services Pty Ltd (AFSL 438 283). Invast staff members may from time to time purchase securities which are included in this or future reports. The authors of this report may or may not be holding a position in the securities mentioned. Please note that the information contained in this report and Invast's website is of a general nature only, and does not take into account your personal circumstances, financial situation or needs. You are strongly recommended to seek professional advice before opening an account with us.

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*Distributed with the permission of Invast.com.au

Date post:	08-May-2015
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Exiting Gold Portfolios in 2013

Investor Relations