We’re going to start this one a little differently… by bragging just a little bit! Last week Intellidex published the findings of the 2022 Securities Broker of the Year survey and presented the winners with awards. As some of you know, the Intellidex Securities Broker of the Year survey is an objective client survey-based look at who the best brokers in South Africa are. We are both very happy and just a little proud to say that we ranked at number one for ‘Traditional Investors’ in South Africa. We also ranked at number one on a ‘Value for Money’ basis and came in a close second in the ‘People’s choice’ category. Overall, we came in at number five for the Overall Top Broker of 2022. This on our very first entry! We’re chuffed, but we know there is more to do, and we strive to keep improving our service offering. No jokes though, it is a serious honour to be counted among the best and we are very grateful. Onwards and upwards!
Talking about upwards, that’s exactly where markets moved last week. The short squeeze got proper real on Friday as well, as U.S. markets charged into the close. The primary driver here is the Fed Pivatooor. Ok, what that means is that people are expecting the Fed to pivot from its tightening cycle (putting up interest rates) and start to ease monetary policy once more (lower interest rates and print money also known as brrrrrrrr!). So why did the market rally its face off? Well, simply because the chorus of democrats either writing letters too or publicly calling out the Fed to ‘stop the interest rate hikes’ is getting louder and louder. In other words, the list of politicians telling the Fed to stop hiking interest rates is getting longer.
Now, I am not really too sure about you, but I really don’t think the Fed cares too much about what politicians think. My view here is that the Fed made their plan very clear and are more than likely to stick to it. So, I feel that the market is rallying on a false hope here. At least, that is my current view. It could be right, it could be wrong, time will tell. It just seems to me that overall, the market is starting to expect the Fed to shift its policy stance rather abruptly and I don’t think that will happen. Yes, there are signs of the U.S. economy starting to slow down a little, but it is still running very hot, and inflation is still very, very high.
We have a packed week ahead of us in terms of data as well. The most important releases of course being the Fed on Wednesday (expected to hike interest rates by 75bps) and Non-Farm Payrolls on Friday.
Offshore trade ideas (bigger picture)
S&P 500 (SPY)
The squeeze is on! Looks like we might see SPY trade back to the downtrend line and give it a good test. On the downside, SPY got very close to our target, so we are going to move into a more open-minded stance here. The downtrend will likely be tested and depending on the result of that, we will take a new view. For now, we think that the market might squeeze into the Fed announcement on Wednesday. The pain trade currently is higher and not all the bulls are back in the kraal yet, so we’re betting that the market will do what it can to suck all the bulls in before giving them the whip.
U.S. Dollar Index (DXY)
A little bit of Dollar weakness started coming through last week. Our thinking is that we’ll likely see a bit more weakness on DXY before the Fed announcement is made. From there, we’ll just have to wait and see.
USDZAR
Not really too much to say here. We maintain our short-term view that a weaker USD will lead to a stronger ZAR and we might see ZAR move towards R17.50 in the short-term. We also want to keep that short-term view in context by reiterating our longer-term view here as mentioned in a previous post (click here to read), in which we think that over the next 12 to 18 month the ZAR will continue to weaken and potentially trade as high as R20 to the USD.
Brent Crude Oil
We’ve tried to see the other side of the coin, but we are still oil bulls. We see a large range and what could be the start of a move towards the top of it. Nice high risk-reward trade setup here as well.
South African trade ideas
Anheuser-Busch Inbev (ANH)
Well, stating with a loser. our view was that ANH would most likely break lower, but after releasing some robust numbers on Thursday, the stock pushed higher. If you caught the long, well done! We no longer have a setup here and have been stopped out of our short trade.
Investec (INL)
INL is another good example of a loser. Well, in this case the trade worked rather well initially, but found a bottom and rallied hard past the stop for the trade. At least here we were able to get out the way around break even, but our rounding top short trade idea has been completely invalidated.
Aspen Pharmacare (APN)
Like most of the market, APN has been whipsawing the short-term traders. From a longer-term perspective though, this chart is starting to look more and more appealing. This might be one of those multi-year buy and hold trades that doubles your money with relatively low risk. At least, we think so. Taking this long would of course be better on equity instead of a derivative due to its long-term nature. It does look like a sitter though.
Compagnie Financiere Richemont (CFR)
We’re just putting this chart up again to remind you that it still exists.
MTN (MTN)
MTN is testing the horizontal resistance level here rather thoroughly. Just a reminder that R130 is the stop loss level for the short trade. Should MTN remain under R130 (give or take a few percent – slippage), we will remain bearish on the stock.
The Foschini Group (TFG)
TFG has been under the hammer from a large seller for a while now, despite a decent trading update. TFG is now trading firmly in a support zone, with a backwind of good trading results and eventually the seller will run out of ammo. Therefore, we like the long trade on TFG, at least back to the most recent highs made in September.
Traders meetup
Joining HCA trading
Come find out why we ranked as number one for traditional investors in South Africa. 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.