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.
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.
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.
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.
