5 April 2016


Well, that's the first quarter of 2016 behind us ... in a flash!

And if we all thought that nothing could get any worse after the events of 2015, our esteemed politicians and government officials had other thoughts, packing a year's worth of shock events into just a few short weeks...

...and keeping the Rand's rollercoaster ride firmly intact.

Since the Rand's Crashflash in January, the string of body blows have been thick and fast....

And with all the depressing news hitting the markets from almost every angle almost on a daily basis, the Rand should have weakened dramatically with every new punch, not so?

Well, so goes the common logic. But that didn't happen.

In fact, the market almost seemed to react in complete opposites at times, as shown in the below Chart overlaid with various events that unfolded.

2016-News-vs-Rand-Movements" Click to enlarge

Here are the events as they unfolded, and how the market reacted:


  • 28 Jan - SARB announce a 25bps rate increase
    Bad for business/consumers, good for investors. The Rand strengthens.
  • 2 Feb - Zuma offers to pay back some of the Nkandla money.
    A good development, but the Rand weakens (??).
  • 11 Feb - Zuma's State of the Nation Address.
    A poor effort, but the Rand strengthens (??).
  • 22 Feb - Zuma defends his choice of Des van Rooyen.

    Laughable, yet the Rand strengthens (??).
  • 24 Feb - Finance Minister Gordhan delivers a good Budget Speech, yet the Rand weakens (??).
  • 29 Feb - News breaks on the Hawks targeting of Gordhan
    Bad news, yet the Rand strengthens. (??)
  • 9 Mar - Moody's put SA on alert for a possible downgrade
    Bad news - the Rand initially strengthens before weakening on ECB rate cut the next day
  • 16 Mar - Deputy Finance Minister Jonas drops a bombshell regarding Gupta interference.
    Shockingly bad news. The Rand strengthens. (??)
  • 17 Mar - Another 25bps shock increase by SARB
    More bad news for business/consumers, good news for investors. Rand strengthens further.
  • 21 Mar - The ANC come out in full support of Zuma following NEC caucus.
    Bad news...and the Rand weakens
  • 31 Mar - Concourt Judgment censuring Zuma and Parliament
    Good news for the country - the Rand strengthens initially, but then stalls.

How is that for a conundrum??

If any picture puts paid to the widely-accepted theory that

news dictates the direction of the market, this one does!

As you can see, news is often a TRIGGER (a catalyst), for a move in the markets....

....but it is useless for telling you which way the market is expected to head.

(there is no doubt that if you had tried trading this market based on the news,
you would have lost a packet!)

The reason is that markets are not moved by news, per se, but are moved by us humans...

...it is our reactions to these events that register in the market's fluctuations.

And, when involved in financial market decision-making, far from being objective and rational, the majority of persons act emotionally and irrationally.

You can see that this is clearly shown in the above chart.

So, how do you get any clarity on the market then, if news is so worthless in giving us a hint?

Well, the secret is that human behaviour is predictably irrational.

As humans, we tend to do the same thing in similar circumstances...

...and so these market patterns repeat themselves in a definable manner, according to the Laws of (Human) Nature.

This is the discovery behind the Elliott Wave Principle, which gives us a picture of market direction like no other forecasting method I know.

To illustrate, this what our Elliott Wave pattern count was telling me and my clients in terms of where mass human sentiment was going to drive the market during this very difficult period ... irrespective of the news.


USD/ZAR NEAR TERM FORECAST - 4 FEBRUARY 2016

On 4 February 2016 (with the Rand at 15.3757) our Next Few Weeks update predicted a move down into the 15.55-14.76 area.

USDZAR_NTU_20160204 Click to enlarge

Result: The market broke below 15.55 on the 17th.


USD/ZAR NEAR TERM FORECAST - 22 FEBRUARY 2016

A couple of weeks later on 22 February 2016 (with the Rand at 15.3757), the Near Term Outlook showed that the market had entered this target area and was expected to move lower before bottoming out.

USDZAR_NTU_20160222 Click to enlarge

Result: The market bottomed out the next day at 15.0573 before rising strongly.


USD/ZAR NEAR TERM FORECAST - 25 FEBRUARY 2016

The next update on 25 February (the Rand had risen to 15.6209) predicted a move up into the 16.10-16.80 area before falling back down below 15.00.

USDZAR_NTU_20160225 Click to enlarge

Result: The Rand made a high of 16.3093 the next day before falling sharply.


USD/ZAR NEAR TERM FORECAST - 7 MARCH FEBRUARY 2016

The next Near Term Update on 7 March (with the Rand at 15.3772) showed a bias for the market to reverse around the 15.05 level and move back up into the 16.10-16.80 area before falling sharply below 15.00 again.

USDZAR_NTU_20160307 Click to enlarge

Result: The market bottomed out at 15.0223 on 10 March 2016.


USD/ZAR NEAR TERM FORECAST - 14 MARCH 2016

On 14 March 2016, the Near Term update confirmed the market had reversed and was expected to rise back up into the the 15.80-16.45 area before falling sharply below 15.00.

USDZAR_NTU_20160314 Click to enlarge

Result: The Rand made a high of 16.2429 just 2 days later before reversing and falling sharply.


USD/ZAR NEAR TERM FORECAST - 22 MARCH 2016

The next Near Term update on 22 March 2016 (with the Rand at 15.2011) confirmed that the market had topped and was expected to fall sharply into the 14.54 to 13.48 area over the coming weeks.

USDZAR_NTU_20160322 Click to enlarge

Result: As at 1 April 2016, the Rand had hit 15.6013


How is that for a different perspective??

To repeat, of significance, all the above forecasts were made without any reference to (or consideration of) NEWS or EVENTS.


Which would have served you better during this volatile period?

Following News...or Elliott?

It's not that Elliott Wave predictions will always work out this accurately (humans are not THAT predictable!), but as you can see, what it does give you (like no other system I know) is the following:

  • A perspective of where the market is in the short, near, medium and long term
  • A highly probable future outcome (with likely target levels) for each of these timeframes
  • Invalidation price levels at which the current outlook would need to be reviewed

I believe this shows you the value of having an objective, scientific-based roadmap to show you the way and warn you (well in advance) of what lies ahead...

...especially when for most, it seem like you are driving in fog with your lights on dim and the road is full of unexpected twists and turns (not to mention potholes...)

But as they say, the proof of the pudding is in the eating.



And so, if you are interested in proving this out for yourself, I have a proposal:

I want to give you a 14 day pudding eating plan for free.


Here's the deal:

Try out our forecasting service at no cost for 14 days.

Then, tell me what you think. If you like what you initially see, I'll let you test it fully for another 60 days at a nominal investment.

And then we can talk about the way forward thereafter, and tailor something to suit your needs and your pocket.

And of course, all covered by my 60 day money back guarantee - no questions asked, so you are at no risk whatever.

Sound fair? If so...

TRY IT OUT HERE NOW

... and I'll see you on the other side (the inside track)!

I am willing to bet you won't see the markets in the same light again!

And, if you get nothing else from this post, I trust you will now see the utter futility of looking to the NEWS for market direction ... once and for all!

As always, I would love to hear your comments and feedback - please leave a comment below.

To your success~

James Paynter

James Paynter






Try out our forecasting service risk free for 14 days


 


    2 replies to "Moody's Downgrade, Nkandla Upgrades, Political Meddling and the Markets"

    • Jennifer Rose

      Thanks you James, I have just completed the read and it was excellent and really informative.

      It has changed my perspective on how the news affects the currency!!

      • James Paynter

        Hi Jenny,

        Thanks for the feedback – it took me a long time to realize that myself!

        Once you see the light, the markets are never the same again!

        Kind regards
        James

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