Weekly game plan 29 March 2020

So we’re on lockdown. Nobody is really surprised about that if we’re honest. We are just grateful that our government has acted to quickly and desivesly to curb the rate of infections in South Africa. Quick decisions do not always lead to quick implementations though, unfortunately. We still face a major problem with widespread social buy-in, in the sense that due to their personal circumstances, many people simply cannot ‘shelter in place’ practically. In truth, we are very concerned about how things are going to turn out for the people of our wonderful country.

We’ve been working on an initiative to try and help small businesses in this difficult time. To be very honest with you, that is why this blog post is late today. The last seven days have been filled with late nights and a more incredible display of Ubuntu that we ever thought was possible. Ntati Ramaphosa, you said Thuma mina. Well, we are going! As one people, working together almost literally 24/7 to help the people of this great nation. Right now there is not much more we can say, simply because there is still too much to do. The most important thing that we can ask of everyone who reads this blog is to stay at home and help prevent the spread of COVID-19.

Right, on that note, let’s look at markets then shall we?

S&P500

So turnaround-Tuesday done turned us around! We mentioned last week that we’d expect the SPX to trade down to the 2007 highs, although the market rallied hard. Sure, Friday was not the greatest day, but overall the week was considerably better. There is still extreme volatility in the market and thus we still prefer to sit out of (or be extremely selective with) short-term trades for the coming week. Right now it’s not about being a hero, it’s about surviving the storm.

USDZAR

Perhaps our comments on the USDZAR last week is evidence of us getting swept up into a bit of hysteria… nonetheless we still acknowledge that the R18.44 level remains a possibility. From a probabilistic perspective though, two things are currently equally likely in our view. The first being a push higher to R18.44 while the second would be a retest of the flat top triangle breakout (in other words, strengthening to R15.70). Let’s be honest, it’s the wild west out there and we did get downgraded by Moody’s this weekend (which means that we are officially rated as junk), so really, anything is possible. The weekly candle for last week is a doji, which means plain-old-plain indecision. That does not give us a read on what the market wants to do and hence again we will choose to sit on the fence and watch the action, rather than get involved.

BHP Billiton

We looked at taking a short position on a retest of this zone under the channel that BHP was trading in. This trade is still offering a great risk-reward and we feel that a small short position could be warranted here.

*Please note that these trade ideas form part of a larger weekly plan and the value of financial products can increase as well as decrease over time, depending on the value of the underlying securities and market conditions. The risk of loss arising from trading in Contracts for Difference can be substantial. You should carefully consider whether such investments are suitable for you in the light of your circumstances and financial resources.

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