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 .
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.
