Potential Bottom In USDZAR

USDZAR has entered range of previous small 4th wave triangle of one lesser degree (red rectangle on chart)

It is also the area of the top trend line of the rising wedge we broke out of in May .

USDZAR 9.4500-9.7000 Possible Target

9.4500-9.7000 area ( being area of previous small 4th wave triangle  and also in the area of the top of previous channel) is a possible target for the termination of wave 4

USDZAR Consolidation Continues

The correction in USDZAR has progressed in a more complicated fashion .One way to label it is an A-B-C correction with wave B taking the form of a triangle .Once C is complete we should get the long awaited final thrust to +-10.7000 area

Consolidation Ending in USDZAR

Price action suggest we may have bottomed in wave 4 this morning.Wave e ended with a 'throwunder' the triangle's lower boundary followed by a quick reversal .8 hourly bollinger bands have turned up and stochastics are trying to turn higher from oversold readings .A move above 10.3200 would complete the triangle .Targets are 10.7000-10.85000.A move below 9.9200 would weaken this scenario and below 9.8200 would negate it.

USDZAR Consolidating Before Terminal Thrust Higher

USDZAR looks to be consolidating in a wave 4 triangle .This setback looks like wave e and should hold above 9.8200. Once complete we should see a sharp move higher out of the triangle .The thrust target (the widest part of the triangle) is around 80 c , which will give a target of about 10.8000 depending on where wave e bottoms .10.8000 is also the top of a longer term parallel channel  so is an attractive target.This move should be terminal and once complete we should see  a larger pullback in USDZAR .Any move below 9.8200 now would invalidate the triangle and we would turn neutral.

USDZAR Completing Triangle Wave 4 Before a Sharp Move Higher

USDZAR looks to complete a 4th wave triangle before thrusting higher .A setback in wave e is required before what should be a very sharp move higher.

There is an alternative though.We have been tracking the wedge pattern seen in 2001 very closely (see charts above) Notice once USDZAR broke out of the larger wedge pattern it formed a smaller ,tighter rising wedge pattern before thrusting terminally to a new high.We may be seeing something similar now .Under either scenario we are looking for a sharp move higher in USDZAR over coming weeks .The top of the parallel channel comes in at around 10.8000 ( depending on when we hit it) but we would not be surprised to see an overshoot .Once complete USDZAR should have it's largest correction since January 2011.

USDZAR Consolidating Before Trading Higher. Major High Registered in ALSI ?

USDZAR continues it's wave 4 consolidation before thrusting higher .If this is a triangle (slightly preferred) than an up /down sequence is needed before thrusting higher in wave 5 .If a flat is in play wave C will test the 9.6600 wave A low before thrusting higher in wave 5 .Our targets for wave 5 are 10.6000-11.0000.

R186 Yields

TOP40 Daily


The wave count on the ALSI counts as complete .We are looking for a very deep bear market over the next few years.The initial leg down targets 33000 the previous wave 4 but we expect it to trade a lot lower than that.The spike in bond yields over the last few weeks is a sign that liquidity in the markets is beginning to shrink despite the best efforts of global central banks.Once this move begins to accelerate the belief in the omnipotence of Central Banks will disappear and this will cause panic.

USDZAR Range Trading Below Recent High

USDZAR is mired in a choppy wave 4 correction .It may take the form of a triangle (more range trading between 9.7000-10.3000) or a flat ( retest of 9.6600 low) Once complete we should get a very sharp thrust higher .It is possible that wave 4 is complete at the 9.6600 low already .

USDZAR Bounce From Yesterday's Low Looks Corrective

USDZAR PLUNGES INTO FIB SUPPORT

USDZAR made a near term top amidst universal bearish press coverage both local and abroad late last week .We have moved quickly into fib support which extends down to 9.4200 .This support includes the area of the previous 4th wave triangle shown on chart.This move may be the 1st leg of what will turn out to be a 3 leg correction .So we may get a bounce over next few sessions and than another move lower to complete the correction .I suspect this may take the form of a sideways time consuming market and most of the price destruction is complete.

USDZAR at First Resistance Level

USDZAR burst through the top end of its wedge earlier this month and has quickly traded up to its parallel resistance line .That together with a possible completed 5 wave move on hourly charts suggests we may find resistance at this 10.0000 level  for now.

ALSI Putting In Final Touches For What Should Be A Major High

The TOP40 looks to be completing its final subdivisions of a 5th wave that should lead to a major reversal in the stock market.Almost no one is expecting a major bear market at this juncture."Buy the dip"is the rallying cry from investors.Reasons cited for being bullish are :
1.Don't fight the Central Bank liquidity creation
2.A hedge against ZAR weakness
3.No better investment alternative
  
We think all these points of view will be tested over the coming months/years.In fact the magic power's of the Central Bankers are already starting to be tested with bond yields rising in recent days despite FED, ECB, BOJ et al recklessly buying large amounts of debt.Did Governor Marcus not say that the ZAR was 'somewhat overdone' at 9.2000 and yet here we are at 9.8000 this morning.In truth these Central Bankers cannot fight the tide of the market and when this realisation hits investors that is when equity markets really accelerate lower. 

A break of 36270 (basis futures) should be enough to confirm the high is in.Initial target is 33270 (previous 4th wave ).25000 another 4th wave is another target but we think we will ultimately fall to the 2009 lows around 16000 in the coming years. 

USDZAR Continues to Trade Higher Within the Confines of a Rising Wedge

They threw big foreign bond buying and general 'risk on 'at USDZAR last week but still USDZAR has held the uptrend line of its rising wedge. The top end of the wedge (green line) comes in at 9.5000 now .We still expect break higher in USDZAR and target 11.0000 in the coming months.

ALSI APPROACHING WAVE 2 TOP ?

The ALSI has corrected it's initial impulsive decline and has retraced just over 61.8 % (cash).Many market participants consider the decline to be over and that the bull market is back.This is exactly the sentiment that should be generated at the top of wave 2.If our wave count is correct the downside risk over the next few months is enormous.The 200DMA (blue line on daily chart) may provide temporary support over coming weeks but our wave 3 target is the previous 4th wave around 30000.This is also the area where wave 3 would equal 1.618*wave 1.

SQUEAKY BUM TIME FOR USDZAR

To borrow from the Alex Ferguson lexicon it is squeaky bum time for the ZAR.We have traded back down to touch the 20 month uptrend line.The move from the 9.3000 high to yesterdays low is in 5 waves and has retraced 76% of previous impulsive move.This could be the end of a flat correction .If so we need to trade impulsively above 9.1600 the previous wave 4.If we trade higher in a non impulsive 3 wave pattern and cannot surmount 9.1600 or if we break support at 8.8500 we would have to consider other possible bearish options for USDZAR.

USDZAR EDGING TOWARDS ACCELERATION POINT HIGHER

Upon reflection I have relabelled the hourly chart to show a completed flat wave 2 correction which I think better explains the price action over last few days.The implications are the same though - a small wave 2 has probably ended yesterday and we are set to trade higher.The bigger picture shows the wedge shape of the USDZAR advance over last year or so .We are still expecting an acceleration out of the top of this wedge over the next several weeks/months

INDUSTRIAL INDEX READY TO TOP ?

The INDI has corrected it's initial impulsive decline with a well proprtioned ABC correction to just above 61.8 fib.B took the form of a triangle.If this labelling is correct the INDI should be close to a wave 2 top .Wave 3 should take us well below the recent lows.

USDZAR HAS CORRECTED INTO APEX OF TRIANGLE

USDZAR has corrected into the apex of the triangle and the upper end of our buying zone. We may retrace further into the Fib zone but we consider this a buying opportunity.

USDZAR POSSIBLY APPROACHING SHORT TERM HIGH

USDZAR has thrust higher out of a 4th wave triangle this morning .Triangles occur in 4th waves or B waves and precede a final move in a sequence.Thrusts from triangles are almost always fully retraced .This thrust higher in USDZAR once complete should give way to a retracement at least to the apex of the triangle +-9.1500.The bigger picture is for a weaker ZAR though and we will use this pull back to reinstate long USDZAR positions

USDZAR CORRECTING INITIAL IMPULSIVE MOVE FROM RECENT LOWS

USDZAR looks to be correcting its initial impulsive move higher .Looking to buy into any weakness into Fib area 9.0000-9.1000 . Risk management level 8.8500 and we are still targeting 10.3000-10.5000 over  coming months .

USDZAR HAS HELD SUPPORT LINE SO FAR

USDZAR traded very heavy last week but still held support line .We think it may be the 'release valve' for the pressure  in the  commodity and equity markets. 9.2000 first resistance.Support at 8.8500 should go untested  under this scenario.

POSSIBLE SHORT TERM TOP REGISTERED IN ALSI YESTERDAY

It looks like we may have completed a 4th wave correction at yesterday's highs .A break of 34200(cash) 34400(futures) would likely confirm this top.Downside Fib targets start at 33300 and extend to 32600 (basis cash). 

USDZAR BACK AT UP TREND LINE

It has been one way traffic for USDZAR the last week which has brought us back to its up trend line.Media coverage on the ZAR last month was dominated by the huge  Current Account deficit and it's bearish implications for the ZAR. On cue USDZAR topped at 9.3600.This weeks currency news has been dominated by the BOJ quantitative easing and it's bullish implications for EM currencies including the ZAR.Will USDZAR oblige and bottom with this positive news ? Daily stochastics are deeply oversold and we are back at trend line support.A close back above 9.0000 would be the first indication of some sort of low.

The Low In the ALSI Today Was Probably Part Of An Ongoing Correction

Today's marginal new low in the Top 40 cash was probably a B wave of and ongoing 4th wave correction. ALSI futures did not register a new low there by creating a near term divergence .Added to that we had expanding breadth relative to Fridays low.Both momentum and volume indicators also did not make new extremes.If a triangle is in play we will have a few more sessions of sideways trading between 34235 and 33776 (basis cash) before we trade lower .If a flat is in play we will trade above 34235 (possibly towards 34500 ) before turning lower. 

PANIC SELLING IN ALSI

First real panic selling in the ALSI for a long time seen today.We are possibly finishing up a 3rd wave here and we have lightened up on our short positions going into the weekend.

CFR LOOKING TIERED

Waning momentum and whats looks like a completed corrective bounce leaves us negative on CFR with a risk management level at 75.25

ALSI IS FALLING IN A 3RD WAVE

The late afternoon fall in ALSI futures reinforces our contention that we are falling in a 3rd wave which should take us to at least to 33912 (basis cash) where wave 3 =1.618*wave 1 .Coincidentally this is the area of the lower trend line of a broadening top formation.breadth was very negative at the close with MTN and SHP the only shares in TOP40 eking out a gain.

TOUGH DAY FOR THE ALSI

ALSI IN 3RD WAVE ACCELERATION LOWER

If the labels on this chart are correct bounces in the ALSI will be shallow and we will accelerate lower over coming days

USDZAR CONSOLIDATING BEFORE TRADING HIGHER

USDZAR has traded choppily higher over the last year or so.The pattern is not to dissimilar to the pattern seen in the 1st half of 2001.USDZAR exploded higher out of that pattern and we believe it will do the same again once its current pattern exhausts.We are buyers on dips and believe this current dip maybe the last one before upside acceleration .The dip has been very shallow (one would have expected a deeper move into the 9.0000-9.1400 fib zone)Perhaps the shallowness of the retracement is a sign of the weakness of the ZAR .Regardless once this consolidation completes we expect a fast move towards 10.5000.

TOP40 MAY HAVE REGISTERED A LARGE DEGREE TOP LAST WEEK

In our opinion the the ALSI is over loved and over owned.Market participants are conditioned to buying any weakness in the stock market .This strategy has payed off handsomely over the last 4 years so why change?!As a result of this general mindset positioning and sentiment are flashing warning signs in addition to waning momentum.Most importantly the wave structure is arguing for a top.We are immediately bearish with a risk management level at last weeks high of 35840 cash and 36110 future.A break of 34575 (cash) would open up a double top target of 32560 but we are ultimately targeting +- 29200 being the apex of the 4th wave triangle.

USDZAR Update

Short term USDZAR may have options but looking at the bigger picture we have been hugging the uptrend line drawn from the July 2011 low.We have formed a wedge shape not to dissimilar to that seen in 2001.If the 8.7600 low holds now we think the chances of an acceleration out of the topside of wedge are good.We are  targeting  10.3000-10.5000 for this move over the coming months.

Sentiment has turned decidedly negative in South Africa in recent weeks as depicted in this Time magazine cover. Belief in the equity market's ability to return double digit returns has not  soured however as investors still  believe it is the only way to hedge against inflation and the depreciating ZAR. If we are right about the coming  bear market this confidence will evaporate over the coming months .

ALSI Big Rally to Start the Month

5 waves down tilts the probabilities in favour of further weakness to come in the ALSI .A furious short covering rally on the 1st day of the month is wave 2 which may be complete already .There is an open gap and the 61.8 % retracement level  at  around 36800 if there is further upside .Once complete the next wave down should take the ALSI considerably lower than 34470 low registered earlier in the week.

USDZAR approaching a major low

 USDZAR looks to be finishing off a correction that should lead to renewed ZAR weakness .Assuming we bottom in this area (8.7000 the 0.618% level would be the maximum probable downside) targets would be 9.5100 (where wave 3 would equal wave 1) but more probably 9.9800 (where wave 3 would be 1.618*wave 1)

TOP 40 SPOT

The rally today appears to have completed a three wave rally from last week's lows.These lows should be exceeded in coming sessions .The question is will it be wave 5 or will the market accelerate in wave 3 of 3 ?Wave 5 will equal wave 1 at 35060 and will be 1.618* 1 at 34680.If we are dealing with a series of 1-2 s wave 3 should take us a lot lower ,possibly 32600 being 2.618* wave 1 before a consolidation in 4  than lower again