I trust you had an excellent end of year break, and take this opportunity to wish you a healthy and prosperous 2021.
As we enter into a new year which one would hope is not as chaotic as the last, the early signs were not good.
We had an astounding week of market activity, and more news headlines than we could manage to keep up with.
The Rand, after a quiet December, completely blew out nearly 100c in just a few days...
...as the bubble finally popped (right in line with our forecasts from December).
What triggered this?
Phew, what didn't trigger this?!
It has been a crazy week - and that is only the half of it.
So please join us for the full review...
So, before we begin the Review, here were our latest two forecasts - one from Friday, 18th December, and then the other from Tuesday, 5 January, which was our first of the New Year (click images to enlarge):
As you can see from viewing the two forecasts, the December forecast played out perfectly into the January prediction, where we expected the market to bottom out in the R14.60-14.22 area, before pushing upward of R15.16 to confirm a reversal.
Which was just what followed this week, as the Rand sky-rocketed through to nearly R15.50 on Thursday, following our Tuesday prediction perfectly.
So what were the headlines that stole attention this week to trigger all this?
Here were some of them:
- Lockdowns return - SA's pandemic seems to be repeating all over again, as the nightmare of lockdown is going to have to be relived.
- US Chaos - what started as a peaceful protest at the US Capitol turned into mayhem as a mob broke inside the building while Congress was in the process of debating & certifying the electoral votes
- Georgia Senate Race - Democrats appear to have clinched narrow victories in both these races, meaning the Senate is now also in Biden's hands for massive policy changes
- US Stimulus - this is now the number one priority of the Senate, as we may see yet more debt being taken on by the US government in further stimulus payments
- Bitcoin boom - and finally, the leading crypto exploded to hit 40,000! What an incredible few months it has been...
So, after starting the year on the front foot, the Rand has already had the tables turned on it. It's open on Monday was around R14.64, but by the close on Thursday, we were testing R15.50.
The lockdown locally is back to level 3, and while it seems no move to the level 4 just yet, it doesn't seem to be altogether off the table.
The economy has already taken a hammering, and while the World Bank says it sees a 3.3% growth coming in 2021, what will further lockdowns do?
SA is not alone in this, as the UK went back into lockdown, and Japan declared a state of emergency. All of this stems from a new mutation, which threatens to make the vaccine potentially of no use, even if it were able to be distributed. And with the speed that it has been fast-tracked for distribution, many persons are still rightly concerned regarding its long-term safety and side-effects...
Many unanswered questions...and the Rand took a pounding with these developments triggering what we have been predicting for many weeks.
And there was more triggers too, as the US Senate Race for Georgia took place, and Democrats seeming to narrowly win both of these races.
This is huge for Biden, as he would have both the House and Senate majority Democrat - allowing him to pass far more policies than before.
This is going to affect the US Stimulus, as the Senate may well pass further legislation in the coming weeks for more stimulus check payments, and other government aid - taking on levels of debt which the US will never be able to repay!
So we are certainly in for an interesting few weeks...
And then in the second half of the week, things became even more chaotic...
- On Wednesday, as Congress gathered to certify the presidential election results, a huge crowd of hundreds of thousands of pro-Trump supporters descended on Washington DC, with many supporters upset by the way government was proceeding to certify an election that was fraught with Constitutional issues, irregularities and anomalies. After being addressed by the President, a portion of the crowd then gathered outside the US Capitol building in a largely peaceful protest, but at some point, an unruly mob within the crowd broke into the Capitol, smashing windows and breaking into and trashing members offices, requiring members to take cover. In the midst of this a woman was shot and many policemen injured. This saga will continue to dominate headlines for days to come as investigations into who was behind this (evidence is coming out that some Antifa/BLM activists were involved), how Capitol police managed to botch controlling the situation, and much more.
- On Thursday, after being suspended by social media, President Trump released a video condemning the violence that there had been, and committing to a peaceful transition to the new administration on the 20th of January, amid frantic scurrying amongst Democrats (supported by mainstream media in full blown disinformation mode) to try again to remove or impeach him even before that date for inciting violence - this, despite the President repeatedly having called for a peaceful protest and for respect of law and order - and calling in the National Guard when it did not remain that way. Crazy but true!
Bitcoin…ah yes, the gold standard of digital currencies - it has been on an absolute blinder the last few months. This week though, was when things got really crazy. An absolute explosion saw us go from beneath 30,000 up to a shade below 42,000! These are some astounding scenes, as we are now seeing the total market cap of all cryptocurrency topping 1 trillion Dollars! JP Morgan bank is talking about levels of 146,000 in the coming years ahead… which should be a warning sign that sentiment is at an extreme of positivity.
This is a time to remain calm, look at the patterns, and make informed decisions - which is what we help our clients do. For our forecasts on Bitcoin, take a look here (we've been calling this move to over 40k since 2018...)
- Heading back to local shores, investors will be cautious as Eskom announced that stage 2 load-shedding is back on the cards. This comes as the struggling power utility needs to ‘recover’ and ‘preserve’ emergency generating reserves. All this while fighting a virus and lockdown!
As for the local unit, we saw some recovery on Friday back down toward R15.20, before eventual SA close being around R15.30...
What a whirlwind week it had been...
...and it was just the first of the year!
The Week Ahead (11-15 January 2021)
As we look to the week ahead, apart from all of the other points we have discussed, there were just a handful of economic events of interest:
- USA - Retail Sales, Jobless Claims
- SA - Retail Sales
But there remain plenty triggers here for market moves with unfolding events locally and internationally, and we expect the Rand to be at its volatile best.
Our Elliott Wave based forecasting system has served us well in calling the recent lows and we will continue to look to it to give us direction for the days, weeks and months ahead.
Please take our Rand forecasting service for a test-drive!
This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.
Simply use the link below to get access now. No charge. No card. All yours to trial for 14 days.
(You don't want to regret not having done so this time next week...)
Look forward to hearing from you.
To your success~