The American Bull stumbles blindly forward, without caution, directly into a looming credit crisis. Not perturbed by reality, the American Bull just keeps rallying without a care in the world, resolute to let the next generation pay for its foolishness. And so, headline U.S. Equities Indices, just, keep, trading, higher.
Yeah ok, a little dramatic maybe, but that is what it feels like. Here are the charts:
Bigger picture (offshore trade ideas)
S&P 500 (SPY)
Well, well, well, if the SPY didn’t manage to break the resistance level? It’s not exactly at $420 as we have been calling, but the resistance is broken, nonetheless. The American Bull is strong! Perhaps too strong to keep down. And we are sure that there are plenty of shorts out there about to get squeezed till their eyes tear. It might not make sense, but we are here to follow the market – not make sense of it… thus, we go long.
Nasdaq (QQQ)
And here is the source of the power for the foolishly strong American Bull. Tech. It’s been on a tear and has finally now made a new Dow-Theory-High. Uncomfortably, we have to concede here that all indications point to a turning of the trend and the beginning of a few up-phase in markets.
S&P 500 Volatility Index (VIX)
We’d thought we’d see the top of this range before seeing the bottom again, but alas, the American Bull had other plans. Not shown here is the pre-covid lower end of the ‘normal’ VIX range. Perhaps we break this sub-16 low support and the VIX finally returns to its ‘normal’ before the world got duped by covid?
Brent Crude Oil
Nothing really to report here. Oil is still in this range we’ve spoken about for the past few weeks. We’re only interested again once this range is broken.
Gold
The same could be said for Gold really, as our view has not changed since last week. Gold is at the top of the range and is looking rather likely to move toward the bottom end of the range. Since the American Bull over here is trying to break higher (see SPY), risk on sentiment is returning and Gold might get the axe, so to speak. We think the focus shifts away from Gold and onto PGMs and Industrial Metals from here.
U.S. Dollar Index (DXY)
It looks like DXY has formed a decent base at 101.30 and is starting to break higher. It’s found some resistance at 103.70, which is not unexpected. Up through here and 105.30 is the next stop. Fuel to the ZAR fire if you ask us…
USDZAR
The headlines truly have been sensational. There is some expectation that, since the story emerged that it might in fact have been SA buying weapons from the Russians, the ZAR might strengthen tomorrow. Personally, we hope so, but we’re not holding our breath. The channel target is the moon… uhm, sorry, around R22 to the USD. So, let’s hope it never gets there.
All Country World Index (ACWI)
Good ‘ol ACWI seems to be feeling the influence of the American Bull as well. It looks to us like it’s broken our of a key resistance level and is ready to trade higher. Risk on is here.
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South African trade ideas
JSE Top 40 Index (ALSI)
It’s no secret that we’ve been bearish. It’s not been fun. We’re not turning into bulls on SA inc. here either. We just want to remind our readers that the index rebalancing is coming and CFR is not going to be 17% of our index anymore. This may or may not have a big influence on the ALSI as much of the ‘power’ behind it will be gone. SA inc. has not been having a great time and this is not reflected in the headline index. We suspect that once CFR is largely reduced in weighting, the index might surprise to the downside. ALthough, we’ve been saying that for a few weeks now, so take it with a pinch of salt.
Investec (INL)
INL trade seems to be on track. It’s a volatile and less liquid stock in general, so the rather large down day on Friday does not worry us too much as it is not ‘out of the ordinary’ for the stock. Sorry, couldn’t resist. The weaker ZAR surely helps and we’re still looking for above R116 in the short-term.
Textainer (TXT)
No actual trade idea here on TXT. Just a weekly chart trending like a dream. From R150 to R700 in three years. Not many of those around in this market.
Sun International (SUI)
This is a messy chart, but what we are looking at here is two-fold. First, the yellow is a flat-top triangle that has broken higher and has been retested. The white lines shows some bullish divergence (and a bit of a bounce off the R37 level). We like this stock for a long.
Sibanye-Stillwater (SSW)
We had lift-off from this level once before already, and we felt pretty smart at the time. Since then the sad trombone has been getting louder and louder. But, on the bright side, we’re back at the support level and ready for another try at launching this little stock to the moon. Easy long trade here in terms of a clear stop loss and large risk-reward ratio.
City Lodge Hotels (CLH)
Nothing really to report here, other than to reiterate our R5 target price for short-term traders, and the moon for the long-term investors of course.
Anglo American Platinum (AMS)
The AMS idea has been floating around a bit, but it doesn’t seem to be working out so well. We’ll keep the faith for another week, but below R1100 our commitment to this long idea ends.
British American Tobacco (BTI)
Another winner from the ZARs pain here. BTI has been holding the middle here and we think that a long from here to R710 could be a decent play. Stop under R620.
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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.
