The events of the last week have been nothing short of horrific. But once again, we have shown that the South African spirit cannot be broken! People of all kinds have rallied to not only protect their communities and loved ones, but also to rebuild, repair and bring support to those most severely impacted by the attempted insurrection. Our ability to indiscriminately band together in the face of adversity is perhaps our nation’s greatest strength. And to that end, I want to use this week’s post to encourage you to support KZN this Mandela Day.
The second half of last week got really wild, really fast. Given the fact that hardly anything has changed – in the sense that there are no interest rate hikes on the table for at least another year and a half, and that the FED will continue to buy $120bn worth of bonds every month – we think that the market might have had a bit of a strong ‘knee-jerk’ reaction to the FOMC minutes. Thus, we say buy the dip. As long as the free money keeps flowing, it will be difficult for the market to sustain downside.
Our view has been that one should treat cryptocurrencies much like you would treat any normal individual stock in your portfolio. With the recent rout in cryptocurrencies, we think that it’s time to buy bitcoin. There are many loud voices out there right now (let’s call them paper hands) that are ranting on about how bitcoin is dead… ignore them. Treat it like a normal stock, don’t take massive (or geared) exposure and don’t bother about the opinions of the paper hands. It’s time to buy bitcoin.
Very often we overcomplicate things for ourselves. The easy truth is that trend following it often the best way to interact with markets. Since the trend is currently very firmly up, we’re happy to toe the trend following line for as long as the trend stays in tact.
Markets have been uneasy for a rather long time now. Well, uneasy is perhaps a mild way to put it. Markets have been uneasy for the last few months, maybe, but just over a year ago markets were in a full-blown panic. Thankfully those crazy times have passed. Over the last two weeks, we’ve even seen the VIX below 20, which is something that has not happened in a mighty long time. Lower volatility signals higher risk appetite and we think a VIX below 20 signals risk on in equity markets.
Markets bounced hard in the second half of last week. It’s almost hard to believe how fast things are changing in the current landscape. Although there are so very many reasons to be cautious, if not flat out bearish, the market is just pulling its ears back and making its way higher despite the conditions of the world around it. Thus, given the strong footing the market ended on last week, and of course the charts, we think that we’ll likely see new highs in the week ahead.
Over the last few weeks, markets have remained rather strong in the face of many challenges. Last week we finally got confirmation that more stimulus cheques are in the mail for Americans, although it seems that $1.9 trillion was not enough to help equity indices end the week in the green. Risks remain elevated and volatility is stubbornly not abating, thus we are starting to think that it is time for a pullback. There are a few long indeas in precious metals and commodities, but for the most part, caution is advised.
Well, after all that bearishness, all we got was one day of #marketcrash trending on twitter and a bounce so glorious I’m sure people will be singing songs about it at some point in the future. It seems that ‘buy the dip’ is not dead just yet. In truth, the irrationality of this whole market is starting to scare me a little, although I am not going to fight the ‘buy the dip’ crowd.
Very often it’s better to not listen to the news, or the hype of all the mad things happening in the world around us. Most of the time, it’s better to just sit down and focus on the things that we can measure. So to a large extend we try to do that this week, although we must admit the the blue wave in the U.S. is probably the primary driver behind the strength we saw last week. It’s very likely going to be the source of a whole lot more strength in the week ahead.
There are still a few weeks to go before Christmas, but hopes of a Santa Rally are starting to take root. For now, most of our watch-list still appears bullish, although there are some warning signs. We could be seeing some early signs of fading momentum on the major indices, although it might still be too soon to tell.