It has been an extended period of positive sentiment in economic, political and financial terms for SA...
...but the the supposed 'Ramaphosa Effect' finally ran out of steam, and we were back to reality this week.
It is incredible how BIG events happen at critical junctures for the Rand, time and time again. And that was what happened this last week.
It was firstly #CabinetReshuffle which brought little reaction from the Rand at all (there was a strengthening in anticipation of the event, but not much afterward)...
...which left many economists confused, who expected major reactions one way or the other.
However, the following day, Malema introduced a motion into parliament, and it was adopted.
Headlines blared:
BREAKING: National Assembly adopts motion on land expropriation without compensation
And EXACTLY as per our prediction from last week, the market soared in the coming 3 days, up toward R12/$...
Who would have thought?
Read on to learn HOW this is possible, and how the Elliott Wave Principle can be so accurate...
Our forecast last week called it already - a bottoming out in the 11.56-11.33 area, and then a break above R11.6895 needed to confirm the move upward.
Click to enlargeA couple of moments were real highlights for the week. Here they are:
- Motion on Land Expropriation without compensation - wasn't Zimbabwe enough of a warning? A shocking decision from Parliament to even consider this communistic idea...
- Cabinet Reshuffle - a mixed bag many have called it, as Ramaphosa apparently does not have as strong a hold on the ANC as many thought he did.
- US Fed speech - US Fed chair Jerome Powell’s hawkish (very positive) testimony apparently triggered the greenback rally - with the dollar gaining more than 1% against majors.
So how did we predict this major bottoming out, despite months of positive sentiment have preceded it?
First, let's take a look at this graph to get an idea of just how much a turnaround we have seen (click to enlarge):
It's pretty small in the big picture, right?
If you are thinking this is insignificant, I wouldn't blame you. However, what we have seen is a very different picture, as crucial levels have been broken, based on our Elliott Wave Principle analysis.
It had showed that sentiment had reached a point of EXTREME POSITIVE SENTIMENT...which signalled a reversal was imminent
And this was confirmed by what we saw in the media, with articles such as this one: Its like 1994 again - SA CEO or this one - Rand Rally continues on positive sentiment and political developments
There are many more examples too - such as persons looking on Ramaphosa's Cabinet Reshuffle and saying it was a well-measured decision on each minister...
This was a sign that positive sentiment had reached a limit. And we called it, with our webinar with Andrew Rissik, and also our article on Fin24 this last week.
And while economists are scrambling for reasons for this move, such as:
- US Fed speech
- Land Expropriation motion
- Cabinet Reshuffle
...these events are nothing more than triggers.
Perfect triggers in fact, for the underlying sentiment.
And by the time Malema started the motion in parliament on Tuesday, the market had in ALREADY reversed much earlier that Tuesday morning, and we saw an uptrend start for the remainder of the week...
...which, if you look at it on the hourly chart is a seriously strong upward push:
And this was despite the return of Nhlanhla Nene as Finance Minister and Pravin Gordhan as Minister of Public Enterprises (arguably the 2 most vital roles) could see the rand avoid the dreaded downgrade.
AND all 3 major rating agencies had commended the 2018 Budget Speech...!
Once again - it just proves, you cannot look to news for market direction.
Do it at your peril!
So our next forecast on Wednesday was done, purely looking at the Elliott Wave Principle, giving us a accurate outlook for the coming days. A small retracement was possible, however, the upward trend was expected to continue, to target the R12/$ level...
Click to enlargeAnd with little retracement, we saw the market move on upwards to test the R12 level on Thursday & Friday, touching as high as R12.02/$ - a very swift loss of 50c meant that persons were really starting to get a tad edgy.
Who would blame them?
Sentiment was so positive, anything negative happening seemed impossible.
Well...it wasn't!
I hope this has helped you get a better picture of HOW Elliott Wave works, and WHY you cannot trust news for market direction...or economists...or your gut feel...
The Week Ahead (5-9 March 2018) |
So, Monday starts with a bit of a hangover for a different reason than last week - suddenly all does not seem so rosy any more...
There are some major market mover news items this week, so expect some fireworks, especially towards the end of the week.
Where to now for the Rand? It has tested the 12.00 level twice now, and we could see some short term retracement off these levels before we break higher.
So, are you going to be looking at the news this week to get some direction?
And be caught out once again?
Please don't! I've been there, done that, and I've learnt the hard way that you will lose out ... almost every single time.
Instead, let me give you a roadmap of where sentiment is likely to drive the Rand this week, as well as the weeks and months ahead.
It is not an exact science, but it will put the probabilities in your favour like no other system I know - and give you a framework (and a sense of clarity and confidence) to make educated and informed decisions....
...instead of emotionally-charged ones that will sabotage you every time!
Kind regards,
James Paynter
