The market has been really difficult these past few months. Well, to be honest, these past few years. It seems though that finally the retail army has been filled with fear and we saw retail flows sell en masse last week (the week before we saw institutional selling) while institutions started buying again. Although this by itself is not a reliable indicator on which to take action, it does show that ‘the smart money’ is starting to nibble at equities again. There is also around $33bln worth of US equity buying to do before the end of the quarter in order for pensions funds to rebalance and remain withing legislated asset allocations. Add quarter end and the ‘window dressing’ phenomenon and you the makings of a bull potion. Bigger picture wise, there is no real change and the world economy still looks very much in trouble, but in the short-term, Friday’s bounce might have legs for another few days.
Offshore trade ideas
S&P 500 (SPY)
R.I.P. the bears of last week! The longer bear markets go on though, the more brutal the bear market rallies become. From here the question is whether or not the down trend is now done and are we turning? Our feeling is that we will very likely see SPY test $400 (4000 Index level) before encountering another stumbling block. Essentially, we see no real change in the fundamental backdrop of the market and thus no real reason for the trend to change in the short-term. Therefore we maintain our expectation for SPY to trade lower towards the $338 level in the coming months. Markets do not move in straight lines though and given the fact that retail has finally started selling in droves (large retail sales volumes last week), we might see this market bounce into the last few days of the month and quarter. For now there is no really clear setup for a new trade here and thus we are happy to wait for a higher probability setup. Subject to change when there is new information available, our view is that we would like to short SPY around the $400 level if we get a chance too.
The same reasoning applies to QQQ. Perhaps this bounce has some more legs, but once the bounce has run its course, what is there to drive this index and the stocks that make it up higher? Perhaps the next real true catalyst will come once the next earnings season rolls around and we can get a better sense of how the actual companies are doing in these volatile and challenging times?
All Country Wold Index (ACWI)
More of the same… perhaps a push into the $88 region followed by a few days of sideways before we resume the secondary trend (down)?
MSCI China ETF (MCHI)
Finally a decent setup! Perhaps here the question of are we turning can be answered..? Momentum is giving a buy signal and we have a break of a significant down trend resistance. Further, we can debate which economy is going to emerge the victor after all this covid business and now the European conflict, but from the looks of it, it would seem that China have taken an early lead here. We would like to get some more China exposure for long-term portfolios and we think that this is a good entry point for longer-term investors
We’ve started losing some faith in our gold chart, although note that Russia is being hit with sanctions on gold exports which could send the shiny yellow metal into the stratosphere. It might be a bit early to make a call now, but if the ban on Russian gold creates a bit of a shortage in the physicals market, we could see many holders of gold futures contracts (paper gold) demand delivery of physical and then we are in a real shortage situation. So although we’ve started losing some faith in our chart, we are still bullish gold.
Brent Crude Oil
Oil is on a bit of make or break trend line at the moment. Are we turning back higher and pushing for $130, or are we going to see a break here and a return to the longer-term trend line with support around $90 – $100? Our bias is screaming that we see higher prices, although the popularity that the energy trade has gained in recent months is making this an increasingly crowded trade. An interesting side note though; we’ve seen a few European countries call for the all-EV-by-2035 goal to be pushed back. This could mean more oil demand for longer… All in all, it makes sense for energy to keep going higher, but in the short-term we are open to the idea that we see a brief and violent correction. For us this means that we will do nothing here, other than sit tight and be patient with current energy long positions.
US Dollar Index (DXY)
DXY is still holding above 2008/09 GFC levels… is there more panic on the horizon?
South African trade ideas
JSE Top 40 Index (ALSI)
Our chart says more downside is on the cards, but are we turning? It is interesting to see that the AlSI has been mostly range bound in the support zone that stretches back to 2021. Early indicators tell us that we are in for some ‘risk-on’ at least in the first half of the coming week, so we might see a bounce up towards 62000. From there though, we will have to re-evaluate. Perhaps it would be good to sell some ALSI higher up… perhaps through BRICS, South Africa comes out ahead of the rest of the Western world and remains a relative outperformer for many years to come? In the very short-term though, there is some bullish divergence, although no real momentum setup to speak of. We’ll sidestep this one for the week ahead.
Anglo American (AGL)
It’s not the worlds best setup. In fact, its not even a ‘B’ rated setup. But is might be a hammer formation and a gap up and run on Monday will make it an morning star formation. You can put a really right stop loss on here and get a very high risk-reward trade here if in fact we are turning.
Astral Foods (ARL)
This short trade is very likely to stop us out early in the new week. We liked the overall bearish backdrop in the macro environment matched with a big range and a high risk-reward setup. That said, right now it is looking like there is more risk than reward here as we expect markets to be strong early in the week. We will stop out of this short trade above R195.
Compagnie Financiere Richemont (CFR)
Maybe another contender for ‘yes’ to the are we turning question. Honestly this looks like a good setup to us and even though the world economy might be falling apart, luxury goods remain a strong market. CFR has come down a long way since its post-covid-QE-driven-madness-rally and has held a key support level well. We now see momentum starting to signal a buy as well as a trend line looking like it wants to break. We like this for a long trade, but can only enter once we see the downward sloping trend line broken. That could come as early as the close of the market on Monday.
Not the greatest of setups, but still some bullish momentum and a fair amount of bullish divergence. We think DSY could be a decent long from here.
Life Healthcare (LHC)
LHC is also looking like it is starting to turn. Decent break of a trend line, momentum signalling a buy, its peer (MEI) has done magic in recent weeks… things are looking fairly decent for a long trade here.
Our MNP short does not seem to be working either. We’ve not stopped out yet, but we’re almost ready to get out for a loss. Maybe we were early, maybe we were wrong..? Either way, we will run for the hills and live to trade another day.
Has the storm finally passed for NPN and are we turning after all this time of down trend and relative undervaluation? Perhaps, yes. NPN looks set to test previous support (now resistance) around R2330-ish. If it can get and hold above that level, we could be in a proper trend change scenario. For now, much depends on earnings (which are due on Monday) and how management plans to ‘unlock value’ for shareholders. The recent tech policy relaxation in China and the view that China will recover from current turmoil faster that the US, makes for a compelling case to add NPN (and PRX) back into the long-term portfolios. Let’s see what the results show on Monday and if NPN (PRX) has plan to close the valuation gap with Tencent.
Old Mutual (OMU)
Another short bites the dust! OMU reversed very strongly on Friday and we might have to bail on this short trade as well. Although OMU counts as a ‘less liquid’ stock, the sheer size of that bullish engulfing candle cannot be ignored.
Joining HCA trading
HCA trading offers a number of different trading accounts to suit different types of traders. Our offshore trading accounts allow traders to buy shares, ETFs, CFDs and even fractional shares in the United States for only $2 a trade. Locally, we offer shares, ETFs and CFDs at good rates with robust and reliable trading platforms. All our trading, including CFDs, is done on a Direct Market Access basis and thus our clients are able to interact directly with the real equity market and not have to worry about excessive counterparty or liquidity risk. Our prime broker locally is a big four bank and offshore we make use of one of the largest non-bank prime brokers in the world.
Local stockbroking rates
|Trading instrument||Brokerage rate||Margin rate||Minimum trade charge|
|JSE listed equities and ETFs||0.30%||100%||R150|
|CFDs on JSE listed equities||0.20%||10% – 25%||R50|
|SAFEX listed index futures (ALSI)||R20||6% – 8%||R20 per contract|
Offshore stockbroking rates
|Trading instrument||Brokerage rate||Margin rate||Minimum trade charge|
|U.S. listed equities and ETFs||USD 1 cents per share||100%||USD 2|
|Canada listed equities and ETFs||CAD 2 cents per share||100%||CAD 2|
|U.K. listed equities and ETFs||GBP 12 + 0.1%||100%||GBP 12|
|Germany listed equities and ETFs||0.20%||100%||EUR 8|
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*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.