Well then, I don’t anyone could have seen that coming… South Africa stands accused of supplying Russia with weapons and munitions for their war effort. Alright, so the good ambassador has apologised profusely for his ill-timed comments and not following due process to raise concerns, but notably he did not retract his statement. So now there will be all sorts of investigations and denials and all the other jazz that comes along with that. The damage has been done though, to a large extent. Perhaps we see a strong reversal of the Rand on Monday morning now that the U.S. ambassador has done a 180? All we know is that we don’t know. These are confusing markets. Best to remain cautious and defensive and ‘take the quick turn’ – as the saying goes.
Bigger picture (offshore trade ideas)
S&P 500 (SPY)
So the SPY still has not taken out the $420 level and thus we still cannot turn bullish on S&P 500 stocks, or the global economy as a whole. There is not really too much to add here that we have not mentioned over the last few weeks. If SPY can take out the overhead resistance, get buying. Until then, either stay short or stay out. We must wait for a confirmed signal before we can make any longer-duration directional calls.
Nasdaq (QQQ)
And in absolute contrast to what we just said above, we think that tech is likely worth buying. QQQ just does not seem to care about the macro picture. We think this could be for a variety of reasons, although one of the most obvious are that big tech were among the first to cut jobs when times started getting tough. Thus, their earnings are likely the most ‘protected’ when compared to other industries. Also, companies like Apple are becoming banks (which, during a banking crisis, seems like a genius move to be honest), and other large cloud computing providers like Microsoft and Amazon, and of course the chip manufacturers that support those industries, are on a path of rapid and accelerating growth. Maybe during these confusing markets it might be time to buy tech again?
USDZAR
Alright, let’s get into it… we look at two charts of the USDZAR. First up is the daily chart. Such a beautiful breakout (which we pointed out on twitter on Thursday), well done to those who caught it. We’ve been whipsawed by the ZAR over the last few weeks, but this sideways pattern it was in had to break at some point and it clearly chose the path of pain over the path we would have preferred, but so be it. The second chart is a rather unpopular chart we have been putting up every now and then for a good while now. It is a weekly chart showing the upper end of the channel at around the R21 to R22 area. Maybe we see the ZAR fight back some on Monday, but honestly, will all that is happening locally with electricity, growing unrest and food security concerns… buckle up buttercup, it’s going to get wild. We hope we are wrong.
U.S. Dollar Index (DXY)
We expected DXY to break support and trade toward 99.50, although it seems that DXY strength won the day. The question we are asking now is, does the DXY range between 101.30 and 103.70, or, 101.30 and 105.30? Also, to be fair, we’re not so sure that DXY strength or weakness will have much of an impact on our local ZAR anymore, given the rather strange and unique circumstances and events surrounding our own currency.
Gold
Well, it seems that gold might actually be holding this upper resistance level. If that is the case, perhaps a short from here back to the bottom of the range? You will have to keep a tight stop though.
Brent Crude Oil
No move to the top of the range then..? if $70.45 breaks to the downside, it’s over for oil and energy stocks.
American Tower Corp. (AMT)
Not a trade idea yet, but watch for a bullish break here.
South African trade ideas
JSE Top 40 Index (ALSI)
Nothing to get the ALSI bid quite like the ZAR blowing out! Despite basically all the locals being under massive pressure, the dual listed stocks have been pumping! Not to mention the great CFR, which my itself at one point added over 1100 points to the ALSI rally on Friday. We’ll look at CFR next for some guidance, but we are cautious of the longs here.
Compagnie Financiere Richemont (CFR)
If CFR gaps down on Monday and puts in a close below R3200, that would make the shooting start to end all shooting stars! So maybe, just maybe we might see that ALSI short working out? That is a pretty big maybe though and we’re not really all that keen to bet against the madness of markets. This candle is not very bullish though and might signal the top of what was one crazy move. A gap lower at the open is worth selling into, just keep a very, very tight stop.
Investec (INL)
INL is still looking pretty good. The weaker ZAR should help a little as well. We’re holding out for between R112 and R116 for now. A close below R100 and we’re out.
City Lodge Hotels (CLH)
CLH long is looking very good. R5 target price should do just fine, thank you very much.
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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.