Well, alright then. This market is wild. Three weeks ago we ran for cover saying the ‘the bear is here’, the following week we’d thought that maybe because the market failed to push a new low that maybe ‘the bull is back’. It turns out that the market is full of bull… and last week the wheels properly fell off the bus. So, welcome to whipsaw city, where nobody knows what is going to happen next, but everyone can be sure they’ll get injured! What a vibe -_-
On a more serious note though, the market has been super wild and things are actually starting to look pretty bleak again. It takes some work to try and stay flexible in mindset in these conditions because there is a lot of evidence that things are bad and getting worse. Banks are collapsing, Oil is cratering, global conflict is escalating and come Monday in our local environment… well, perhaps this is not the place to express opinions on that. The point is, either it is now darkest before the dawn, or the night gets even darker. The eternal optimist in us chooses to believe that things will look up shortly, but the pragmatist looks around and starts to plan for the inevitable.
What does this mean for your trading though? And likely more importantly, your investments? Well, we will admit that we’ve been whipsawed a little of late, but we are still holding around one-fifth in cash. Last week some members of our investment committee (Petri, it was Petri) felt a little more panicked than the rest and wanted to free up even more cash to at least cushion the fall a little, but sanity prevailed. The facts here are, well, that we don’t know what comes next and not panicking is definitely the best move that we can make.
So let’s see what the week ahead holds. The world is once again starting to bet on a Fed pivot… maybe the conditions for that are now finally right? Maybe the Fed knows that it’s going to get worse and will stay the course to keep inflation in check. Who knows? All we can do really is follow the charts, follow the macro data, and sit quietly while the bus clammers and clunks its way through whipsaw city.
Bigger picture (offshore trade ideas)
S&P 500 (SPY)
So alright, maybe it did not bounce off the tertiary uptrend line, but it is still sort of holding above the primary downtrend line. So, keeping a flexible mindset, this could still be a retest of the broken downtrend and a trend change scenario. There is of course the chart comparing this current bear market to the 2008/09 bear market, which is the fractals are correct, indicates a whole lot more downside. Just a few weeks ago we would be in that camp calling for the bottom to fall out, but as we sit here today, we have to stay open to the idea that the market could be turning. Should we see a move lower, back below the primary trendline, then we will have sufficient evidence to be convinced that we will see a new low (and ironically, this will put our original downside target from 13 or so months ago back on the table). So let’s see what happens. Just keep tight stop losses.
DAX Index (DAX)
When good trendlines go bad! The trendline eventually broke and the initial target was hit. Where too from here?
Hang Send Index (HSI)
If you look closely, there is some bullish divergence there over the last two or three weeks. Just saying. Whipsaw city is a real place. If you forced me to trade here, I would go long.
Nasdaq (QQQ)
Talking about things I would buy if I had to buy something… QQQ is looking very strong given the greater macro madness taking place in whipsaw city! Maybe tech is going to start outperforming energy again for the next few years. Definitely something to keep an eye on.
U.S. Dollar Index (DXY)
DXY looking to retest the 101.30 level. Wait for the break below 103.70 (which then becomes your stoploss).
Gold
What a rally! Gold stocks pumped hard off the back of this as well, and likely will rip higher on Monday too. $2000 might be a bit of a strong resistance level, but once through that, maybe we top out above $2080 this time?
Brent Crude Oil
Oil is probably the primary factor that makes us rethink the ‘this is the low and we’re going up from here’ thesis. Oil is back in the downward sloping channel as global recession fears dries up demand. Unless we see a turn here, odds are good that equities will keep selling off. Maybe that 2008/09 fractal is right?
VanEck Junior Gold Miners ETF (GDXJ)
Well, there is always a long trade somewhere and GDXJ is looking prime to make a new high. Our first target here is $42, second target is $48. It will take some time, but the high gold price is really going to help get the junior gold miners going.
USDZAR
Once again we show the weekly chart and the large upward sloping channel with a price target of R21 to the USD. Not a pretty picture, we know… and if things get spicey on Monday, we’re sure that wont help. This will make for a great trade though, as long as you don’t over gear yourself and have some patience to let it play out over the next few months.
South African trade ideas
JSE Top 40 Index (ALSI)
The very steep trendline broke, had us second guessing ourselves for a short while, and then the ALSI melted like soft butter in a normal fridge during stage 6 loadshedding. The downside target here is the zone market in grey (between 64k and 65.5k). The brave traders would likely buy some near here as we know that the market will bounce and if the ZAR blows the rand hedges will help support the index. We’re not sure we count among those brave traders at the moment though.
Compagnie Financiere Richemont (CFR)
Despite the ZAR support here, we think that CFR will test that R238.60 level in due course. Global recession fears will likely be a more powerful force than a weaker ZAR.
DRD Gold (DRD)
A nice little bull flag here on DRD, backed by global economic meltdown… uhm, we mean higher gold prices. We mentioned above that the junior gold miners will likely be big winners in this, and DRD is a fine example of that.
Naspers (NPN)
R2780 incoming! That little range break at the high was a great short entry. It really tested your steel when it retraced to above R3400, but the fat lady is currently singing and the short is a nice place to be.
Remgro (REM)
No real trade to do immediately here, but maybe worth a buy around R125.
Sibanye-Stillwater (SSW)
SSW is a much more complicated play these days as it has so much more than just gold. Palladium and Platinum have not exactly had the best time either, nor do they have great looking charts. Nonetheless, if R36 can hold, we think that an entry here for a medium-term trade can work well. Just keep an eye on R36, because a break there will open up for R32.
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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.