We suspect that over the next few weeks and months, mainstream media is going to get swept up in the ‘all about Bitcoin’ narrative. More importantly, Thanksgiving sets off a number of seasonal patterns as well. We need to combine several of them for one trade.
Last week, after a strong start to the week, we saw the moves fade and the rest of the week resolve in directionless action on the major indices. Locally our banks popped well, although started pulling back a little in the second half of the week. For the coming week, we see opportunities in Gold miners for high risk-reward long positions at the start of the week. With some luck we’ll see decent pullbacks in the banks for good long setups in the second half of the week.
Finally the US election is behind us! We’ll still see how far Trump goes to contest the election outcome, but so far it seems the the courts are not entertaining the idea. So ok, Biden wins, what now? It is reasonable to expect that more COVID related stimulus will done and the Dollar should keep weakening on that. This likely leads to more ZAR strength and might direct some investment flows into emerging markets.
Thinking about the week ahead and the craziness that is about to unfold with the US elections, my initial thought was that there would not be too much to do. In fact, I’d been planning to basically just put out a warning about this week and recommending that we just keep it small and keep it tight. To a large extent that is still what I am doing, because it’s going to be wild out there. That said, there are some charts and ideas floating around inside the HCA trading community that are worth sharing. Just keep those stops tight and the trades small. The money is made by being around long enough to capitalise when it’s easy, and allowing the market trends to do the work.
Generally markets are feeling fairly good going into next week and the weekly game plan is centered around buying some pullbacks in the banks and avoiding long positions in resources and precious metals. We have been seeing good old fashioned sector rotation locally, with funds flowing into banks and retailers and seemingly local property as well. This is likely being driven by investors looking for value, of which there is much to be found among the ‘locals’.
Overall markets are feeling a little ‘in the middle of nowhere’ at this stage and thus our weekly game plan is to mostly be patient and wait for better setups. We look at some of the major U.S. indices and note that there are no really good setups to be had at this stage, although Gold, Sliver and Oil might be setting up for some decent trades. On the local front, we’re probably complaining too loudly about low volumes, but there seems to be a select few good setups.
Every week in 2020 seems to get stranger and stranger. Last week we saw the death and rebirth of stimulus talks and Trump uses his ‘art of the deal’ tactics to look good for the election. Make no mistake, the election is a big deal and it’s coming closer. Odds are that volatility will pick up a little heading into the election and thus we’re happy to take it very slowly. That said, markets are looking generally strong and confident at the moment.
We’re experimenting with something different this week. Let us know what you think!
The world is mostly mad, but luckily our views and beliefs about the world around us has little to do with what is actually happening, and the key to moving forward is to respond appropriately to the external environment, regardless of whatever it is that we might believe. Our job as traders is now and has always been to simply follow the market. Therefore we look mostly at technical analysis again this week so that we stay unbiased.
If there is going to be COVID related fallout from the demonstrations, we should start seeing an uptick in COVID-19 cases around the world in the coming week or two. This will be an interesting metric to watch as it could potentially send half the world back to hard-lockdown. We’ve already seen the state of Florida (in the U.S.) record a record number of new cases last week. Should that trend continue and emerge in other states or even in other countries, we think that it could create a reasonable amount of fear in markets once more.