After the crash-boom-bang of previous weeks, this one was a little sleepy for the Rand as the dust began to slowly settle (except for Friday), after a frantic couple of months...
Although not 'out of the woods', this past week certainly added just a bit more stability into the markets, with hopes that they may one day resettle, slightly rejuvenated...
...that being said, the stability we talk about now is not the stability we have talked about in the past.
Stability was a day with a range of about 15-20c (the average daily range since January is 30c per day)
So what we saw this week was not the stability of old, but just something to calm everyone down a little. From Monday at 8am, to Friday 4:30, the difference in the price was less than 10c. So in that way, not much was lost or gained.
Lets take a look at how the slower week worked out.
How It Happened (14-18 Nov 2016) |
When we began the week trading at R14.35, the markets had just come off a bumper week, with US Elections, #StateCapture reports and more. Everyone was just hoping for a little bit of stability and calm, even if the Rand did not strengthen!
Monday began as always with our forecast (see below - click to enlarge) for the coming few days.
The outlook was not good, as the Rand was expected to go some way further, weakening even more to the Dollar, although some consolidation was to be expected first.
The only saving grace for this week would be if the rand managed to retrace far enough, it would delay that upward move, by breaking through the 14.1854 mark....
Click to enlargeAnd the Rand rose gently above 14.50, to make its high for the day around mid morning. But after that, the consolidation came.
The market actually moved quite steeply in the Rand's favour, and before we knew it, there was some real momentum starting to kick in!
The Rand pushed further - 14.40, 14.30, 14.20!
By mid morning on Tuesday, it had gone through our delay mark of 14.18, and was now trading at R14.10 (with no real big market economic events happened in this timeframe which could have affected or triggered such movement..).
..however, a delay point does not invalidate our forecast, but it does mean that it will take longer than normal for it to be validated.
These are not very common but do occasionally occur.
So now that we had seen that mark broken through, we could expect it to take a little longer for things to fall into place on our forecast. And that was pretty much what we saw, as the Rand was very gentle for the remainder of Tuesday, despite the line up of US Retail Sales.
We saw it meander along at a slow pace, without much action as it tracked sideways until Wednesday.
The slumping of the Rand had certainly sent every one into a negative sentiment, and despite this strengthening in the first half of the week, the outlook did not give a lot of hope.
On Wednesday, the news regarding SAA's 2015/2016 financial year came out...
...it was not good news. Far far from it.
SAA had made a loss of R5.64bn loss in 2014/2015 and a further R1.47bn in 2015/2016.
This was blamed on their reliance on foreign currencies (60%), and their CEO explained their problem as being that their hedging skills are "not so good". (how can you possibly have hedging skills which are not so good when you are playing with that much money?!)
So there was not a lot to cheer about as we headed into Wednesday, and the Rand unfortunately did not give us anything to cheer about either. It weakened throughout the morning and early afternoon, and it was soon above R14.30 again.
So on Thursday, we were due for another forecast which was going to show us what was coming for the next few days. Our previous forecast was still expected to be more or less in play due to it being delayed, but an update was still necessary.
So as our subscribers saw when we released it, the previous forecast was fairly close to the latest one. The latest prediction showed the Rand moving into the R14.62 - 14.94 area with the chances of another small consolidation still there.
Click to enlargeAnd from Thursday morning, the Rand weakened slightly, as it moved a bit lower during the day while still remaining very stable for the most of the day.
As it got later in the day, the Rand weakened further, and we saw it moving above R14.30 and closer to R14.40
This was following our forecast quite nicely, and as Friday morning arrived, we were expecting to see it moving quite a bit higher into our target area.
And on Friday, it did just that. By 8am, it was nearing R14.50. By 10am, it was well over R14.60 and had made its high of R14.64 to the Dollar. This is the worst level for the Rand since early September.
BUT...
...as quickly as it had weakened, it turned back on the same pathway and reversed sharply!
And so it went...
14.60 to 14.50 to 14.40 to 14.32!
With no events, no news, nothing at all surrounding this move, the Rand just went haywire. It immediately spiked back up another 20c to R14.50 before losing another 15c!
Quite a bit of this movement was after South African business hours too, making it even more volatile.
What is important to note is that the market reversed right in our target area, and with the wave count being a wave [v] (the final wave in a trend is 5-wave move), a reversal or consolidation was due.
Which occurred.
And just when all thought we would be sealing off a calm and tranquil week, the market was hit with a dash of the dreaded market roller coaster!
The Week Ahead (14-18 Nov 2016) |
And so? What did we get out of this past week that we can take into the next?
Any indications? Any sentiment? Any general feeling?
Difficult questions these, as we saw a trend for most of the week, and then the whole market was taken and shaken up and down on Friday afternoon and evening, making it hard to know what really came out of the week.
One thing is for sure though - we are still in dangerous waters, and one should (as always) be keeping a close eye on the markets.
There are bound to be some big moments coming up in the next few days and weeks.
And of course, another event to keep an eye on is South Africa's next review on #JunkStatus...
That is not even considering how last year's December/January went - if that was any indication to go by, then things are certainly going to be dangerous as we head closer to shutdown.
So what next?
Doom, gloom, corruption, bad sentiment and more are hanging around the markets... It is a time where it is always worth considering the see-saw effect, in terms of emotion. Everything is balanced until everyone moves to the one side (either positive or negative)...
...but when everyone moves to one side, what happens?
Is this going to happen?
We can never tell with 100% certainty, but what and our subscribers have is the probable outcome for the next few weeks and months, based on past patterns of sentiment.
And it is this objective view that keeps us focused to make educated and informed decisions, with the probabilities on our side...
...instead of playing the gut feel, hope and guessing game (gambling with the odds against you.
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Our premium subscribers are always up to date with these forecasts (which are based on that very Principle - tracking human emotion):
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To your success~
James Paynter
