Another week rolls by...
...and after making multi-year record lows in the past few weeks, it seemed as if the Rand had finally broken from its downward trend, and pushed back above R12/$ ... for the time being that is.
What was especially satisfying is that this is just what was expected, based on our present Elliott Wave count.
It was a week of big news events:
- Viceroy's Capitec report
- Near Mining Disaster
- American politics in a shambles over some memo relating indirectly to the Russia investigation
- Economic events by the dozen
Let us have a look at how it went...
...and how those waves are showing us were to from here.
Our forecast called it on Friday - a bottoming out in the target area of 11.82-11.29 before heading higher above that R12 to the Dollar level.
Click to enlargeKey moments from the week -
- Viceroy report - the bombshell for the week hit on Tuesday, when Viceroy research released a damning report on Capitec bank...however, there was more to the story than just the headline
- Forex Collusion case continues - more banks have been named in the Forex collusion case as a new affidavit from Competition Commission arrives
- Mining disaster averted - 955 miners were trapped for 30 hours without power, and what would have been one of the worst mining disasters in history, was averted when they got out safely.
- Cheaper fuel relief - the Rand strength is finally paying off in terms of petrol for motorists
- Day Zero becomes a greater reality - in a last gasp effort, persons are finally coming to grips with the reality of #DayZero, and are doing their best to fight it in Cape Town
- Another Bitcoin crash - plummeting to its lowest level of 2018, the gold standard of cryptocurrencies nose-dived to under $8000.
Many economic releases (possible trigger events) were laid out at the start of the week, just to name a few of them:
- EU Q4 GDP Figures
- US Fed Meeting
- EU Jan Inflation
- SA Trade Balance
- SA Consumer Confidence
- US Job Stats
- US Non Farm Payrolls (the biggie)
...and many more!
The big talking point for the weak (beside the Rand's seemingly endless run) was definitely the Viceroy report on Capitec...
The most interesting part about the fiasco on was this piece in their report:
"As of the publication date of this report, you should assume that the authors have a direct or indirect interest/position in all stocks, and/or options, swaps, and other derivative securities related to the stock, and bonds covered herein, and therefore stand to realize monetary gains in the event that the price of either declines,"
So, an assumption may suggest this: Viceroy, just before releasing the report, shorted their shares that they held with Capitec. They were 'bracing' themselves for the crash after this report caused the stir they expected and received.
But, were they?
This can be taken in two ways:
- The conservative prediction: A company taking precaution about where there money is held, making an astute financial decision that Capitec shares are not safe if they believe that everything in their report is correct.
- The dramatic prediction: Nothing short of skullduggery, as they release the report with the direct intention of making money off of the shares which they have just shorted on, while knowing that there are irregularities in the information they have put out.
This is still to be confirmed - but it does seem a very coincidental state of affairs that has occurred - especially with analysts suggesting that there are some points which do not tie up in the bombshell report...
...this is going to be an interesting one to watch playing out.
What was also interesting was how persons treated the news - it resulted in a massive sell-off upon the news hitting...
...but, shortly after that, persons took the opportunity to start buying back, and the shares began to recover fast:
What is fascinating to watch in this game of financial markets (be it stocks, forex, bonds, commodities and even cryptocurrencies) is the ebb and flow of human sentiment as it flows from one extreme to the other - it is an endless game, and it will go on in every market where humans are the ones making the decisions.
Take for example the Rand - there are those that are turning more and more Rand positive as it strengthens.
Some say that this is the best shape it has been in for a decade - while others just cannot move away from the fundamentals and are saying that "this cannot continue forever" (which is both right, but also wrong).
To clarify what I mean:
No market run ever can continue forever, be it a bull (upward) or a bear (downward) movement. However, to just look at the fundamentals, and say that it will give the direction, is not right - fundamentals are a long term driver, but the market's trend can continue for a lot longer in time, and further in price, than fundamentals would like to dictate.
And that is because emotion will drive market direction - and emotion is running high right now, depending on which side of the fence you are sitting on.
- For exporters and local manufacturers, there is fear and anxiety, as an increasingly stronger Rand makes them less competitive locally and offshore.
- On the flip side, importers are increasingly optimistic, complacent and greedily, looking for the Rand gains to continue.
Our emotions drive our thoughts.
Our thoughts drive our actions.
As a result, the price charts you see are merely a reflection of the total sum of the emotionally-charged decisions of all those involved in the market at that time.
So, what I have said may not give the direction as our Elliott Wave forecasts do - but hopefully it helps uncover a little of how the markets are moved, and why there can be positive or negative movement from a currency or market, when there is news or fundamentals which contradicts it.
Some may see the petrol price decrease as extremely positive - while others see it and the Rand strength as insignificant and even misleading...
Everyone sees news or fundamentals in a different way, and places different values on economical, political & social news:
Are you the optimist or the pessimist?
Its a funny old game - and it is no wonder we struggle to understand it...
The fact remained that regardless of what people think is causing it, or how long it was going to last, the Rand was having a fantastic run. Some say that it last looked this good a full decade ago! This chart tells a story:
But then, as per our predictions both on the previous Friday and Wednesday (see the image below - click to enlarge) - the bottomed out was triggered as we expected, and the event which did it was none other than US Non-Farm Payrolls, a notorious trigger.
Click to enlargeThe Rand closed the week out over R12/$, having bottomed out at R11.79 in target area...definitely another win for the Elliott Wave Principle...
The Week Ahead (5-9 Feb 2018) |
There are a few international economic events that could be movers, but all eyes will likely be on the ongoing political fracas.
This week starts with news that Zuma is by no means being a pushover (whoever thought he would be was simply dreaming), as he refused to step down voluntarily following a meeting with ANC top six over the weekend.
With the State of the Nation address looming, Zuma has certainly put the cat amongst the pigeons, and he obviously believes he has sufficient support base within the ANC to play his cards the way he has.
Some interesting days ahead. This one could still get nasty...
What does that mean for the Rand?
With the market having made a multi-year low, we are looking for some partial retracement over the next few weeks and we will keep our eyes firmly on the charts themselves to give us direction.
We suggest you join us and do the same.
Look forward to helping succeed~
Kind regards,
James Paynter
