Moody's Downgrade, Nkandla Upgrades, Political Meddling and the Markets

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...

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.

Click to enlarge

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

How is that for a conundrum??

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

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

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.

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. 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. 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. 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. 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. 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. 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.

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...

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 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