Well, clearly the idea of a Black Monday last week was misplaced. Even though we saw a weekend filled with fear, the market just shrugged it off and rallied hard on Monday and Tuesday. By the end of the week though, most markets were only slightly higher for the week. It seems that the bulls just can’t get up. The question is why?
In our view, the primary trend is now down and global markets will almost certainly remain in recession for some time. We have not yet seen a bottom and we doubt that we will see a meaningful bottom until at central banks start to cut rates. That is not to say that we expect the Fed and other central banks to pivot. No, indeed not. Rather, we expect that we will be in a tightening cycle for some time and that markets will remain depressed until that cycle eventually changes.
Again, we want to reiterate that for the long-term investor this represents a massive opportunity to buy good quality companies at ever lower prices. The key is patience. It will be some time, potentially a few years before the purchases made now will start to pay off. While the bulls can’t get up in the short-term, those with longer-term outlooks and patience most certainly will.
Offshore trade ideas (bigger picture)
S&P 500 (SPY)
Regular readers will know that this is not a new chart. Our target remains 3380 as the index level now in the short-term. The bounce we saw in the first half of the week petered out rather quickly and Friday saw most of the weeks gains reversed. This is not bullish price action. Unless there is some sort of fundamental catalyst, it doesn’t seem like there is much that is going to change the direction of the tide right now. We move lower.
U.S. Dollar Index (DXY)
As above, so below. Well, the difference here is that the DXY is likely to keep moving higher, while equities keep moving lower. the short-term correction seems to have ended and the DXY bulls are back in control. How far does it go? 116, 118, 130? Time will tell, but as long as DXY is trending higher, we can expect hard times for equities.
Nasdaq (QQQ)
We reiterate our downside target for QQQ. As is the case with SPY (and most other indices), our current downside targets are the pre-covid highs. We view this as our first level of general support. Things will get really messy if those support levels break, but for now, let’s just see if we get there.
S&P 500 Volatility Index (VIX)
Talking about things getting messy… note the range on the VIX between 15-ish and 36-ish. Should we see the VIX pop out the top of this range, hold onto your butts because things will get proper wild from there.
Brent Crude Oil
We mentioned on a few podcasts recently that as long as oil is below $87.25 that ‘you can’t be long’. Well, as the universe unfolds, it turns out that oil spent only a few short days below that $87.25 level and has since then reclaimed the primary trend. Perhaps we see another push for $130 from here? We certainly hope so (note that we are long energy in various forms – and have been for a while – for clients invested in our managed offshore portfolio… so we are totally talking our book right now).
USDZAR
The chart you love to hate. We are looking at a weekly chart here on the USDZAR and we’ll say the same thing we said last week… the chart points where the chart points. Holding onto those sweet, sweet dollars for a while seems like a good call in the current environment.
South African trade ideas
JSE Top 40 Index (ALSI)
Again, not really much to say other than the bulls can’t get up. Regular readers will note that this chart and target has not changed for a few months now. Our downside target remains in tact and we remain patient.
Naspers (NPN)
NPN got close to squeezing us out of our short trade, but we are still in it to win here and remain patient with our setup and analysis.
Sanlam (SLM)
It’s not looking so good for SLM after it broke is rather key support level. This presents a decent short trade, but manage your risk and give it some breathing room. Stop loss above R54 and a trailing stop would likely be best here.
Anheuser-busch Inbev (ANH)
We’ve put this range up a few times over the last year, each time with the view to buy the bottom of it for a long trade to the top. This time around though, we change our tune. This is now the fourth time that this range is being tested at the lows without it managing to make it back to the top (and the sixth time in total since it was established). We are now looking for a bearish break of this range for a short trade. If the bulls can’t get up, the bears will prevail. Range break rules apply for risk management and trade targeting.
AngloGold Ashanti (ANG)
With all the doom and gloom above, let’s get at least one potential long trade on the board. Oh, there is the DXY chart, but we digress. ANG is testing an important horizontal zone of resistance. Should it manage to get up and through this zone, we think it likely to see another face ripper of a rally towards R400.
Traders meetup
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 |
| Forex | 0.40% | 100% | USD 4 |
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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.