Unum Capital: Market Commentary and Trading Research Note [7-Oct-2019]

Unum Capital: Market Commentary and Trading Research Note [7-Oct-2019]

Despite JSE equities closing the week much lower than where it started, it may have just been a great opportunity for short term traders to pick up a few shares that have been battered and bruised as fears around the global economy filtered through to equity markets. On Friday, the JSE managed a small rebound, with the Top 40 adding 0.48% as traders saw the swing lows as an opportunity to buy stocks such as PSG (+4.94%), MTN (+3.74%) and RMB Holdings (+3.28%) while letting go of Anglogold Ashanti (-2.54%), Anglo American Platinum (-2.54%) and Sibanye Gold (-2.17%). We also saw the Rand rebound as a ‘weaker than expected’ US payrolls report dented the Dollar by late Friday afternoon. By the close of the US trading session, the Rand was trading at R15.02, right near the lows of the day while this morning we print R15.07.
European stock markets closed in the green on Friday, tracking gains on  Wall Street, as fears of a US recession eased amid rising bets that the  Fed will boost growth by lowering rates following latest jobs report.  Latest data showed the US economy created less jobs than anticipated  while wages showed no growth for the first time in two years. This comes  at the end of a week dominated by poor numbers on US manufacturing and  services activity, which first raised recession worries. The DAX 30  added 72 points, or 0.6% to 11,997; the FTSE 100 jumped 73 points, or 1%  to 7,150; the CAC 40 gained 40 points, or 0.7% to 5,479; the FTSE MIB  rose 104 points, or 0.5% to 21,415; and the IBEX 35 went up 41 points,  or 0.5% to 8,943. – TradingEconomics.com

Wall Street closed deeply in the green on Friday, after modest job gains  and a decline in the unemployment rate to a 50-year low eased concerns  over the state of the economy while leaving the door open for a rate cut  during the Fed’s next meeting. On the corporate side, Apple shares  increased after a report that it is ramping up production of the iPhone  11 model. The Dow Jones surged 372 points or 1.5%. The S&P 500 41  points or 1.4%. The Nasdaq 110 points or 1.4%. – TradingEconomics.com

Week Ahead: Meeting minutes from the Fed and ECB will be keenly watched next week for further clues on the next monetary policy steps. Other important releases include: US inflation rate and the preliminary reading of  Michigan’s consumer sentiment; UK monthly GDP figures and trade  balance; Germany factory orders, industrial activity and foreign trade; China Caixin Services PMI; Japan machinery orders and producer prices; Australia business and consumer morale; and India manufacturing  output. Investors will also react to US-China trade talks.  

Global Safe-Haven Index (SHIX): The brief rebound in safe-haven assets appears to be fading. This is evident as we observe the price having re-tested the breakdown level with a minor‘rejection’on Friday (04-October-2019) as well as the downward trend line resistance serving as a firm level fro which we saw sellers.

Our risk indicator has been enhanced with the inclusion of four new factors, which takes the total inputs to eight. They now include:  

  1. Gold Futures
  2. TLT ETF (Bonds)
  3. Japanese Currency Index
  4. Swiss Currency Index
  5. S&P Low Volatilty ETF
  6. iShares Emerging Markets ETF (Inverse)
  7. USDKRW (US Dollar / Korean Won) – Trade War Component
  8. Copper Futures (Inverse) – Global Growth Component

https://www.tradingview.com/x/6cMRJDHd/

JSE Top 40 Index (Spot): “Price has memory” is the first phrase that comes to mind when looking at the chart of the JSE Top 40 Spot Index. On Thursday we saw the exact support level at 47538 being tested with a minor rebound on Friday. Should we see the 48000 level being regained, this would potentially push us back to 48855 whihc was Wednesday’s highs and a prior support zone.

https://www.tradingview.com/x/j3UiymUL/

USDZAR: The trend line support going back to 13-September has been breached. This comes following a test of the second target of 15.27 and as well as a high of R15.39 being reached on 02-October. I’m expecting the next support level to come in at around 14.98 which is the 50-day moving average followed by 14.90.

https://www.tradingview.com/x/rHty0pYl/

GBPZAR: In the short term, the pair has retraced to trhe minor support zone of 18.56. Should we see a break below this level, traders could expect 18.38 (the rising 50-day moving average) to hold as a support zone. Following this, the 200-day sma at 18.28 would attracted buyers.

https://www.tradingview.com/x/UWB4mnN0/

Relative Sector Analysis: Major Sectors vs the All Share Index

JSE Resources 10 Index vs All Share Index: The price is failing to hold it’s 200-day moving average and is holding the trend line resistance going back to the 28 March 2019 peak.

https://www.tradingview.com/x/DQ9aHppD/

JSE Industrial 15 vs All Share Index: The price is approaching the 24 July breakout level as well as the 8-month incline support.

https://www.tradingview.com/x/sgLbeCEl/

JSE Financial 15 vs All Share Index: Following the trend line breakout on 16 September, we saw the price retrace to backtest the prior resistance and rebound. In the short term, follow-though may continue however the 200-day moving average may act as a major resistance level over the medium term.

https://www.tradingview.com/x/CF4Svsq0/

JSE Telecoms vs All Share Index: The relative chart sees the price continuing to trade within the short term downward channel in place 6 August. On Friday we saw the price also finding support off the 200-day moving average.

https://www.tradingview.com/x/xVujOUc1/

For a review of any other  sectors, please contact the trading desk.

Rand / Metals

Rand / Gold Price: Price is developing a potential bear flag pattern with downside potential to 20878. Relative Strength Index weakening. 

https://www.tradingview.com/x/vOy5Ad4t/

Rand / Platinum Price: The price has rejected the prior double top support zone with a sharp (-2%) move lower on Friday. RSI very weak at 47 (and trending lower).

https://www.tradingview.com/x/TKhT8PYc/

Rand / Palladium Price: Price remains in bull trend although we had a sharp move down on Thursday. RSI has moved from above 70 to 60.

https://www.tradingview.com/x/VDxz9qC8/

Technical Levels

Absa Group (ABG): Late last week client were notified of the accumulation zone on the trend line support. We saw a dip below this level and a quick reversal back above. This came in at the 150 zone. If we do see follow-through, then 15700c could be a short term target.

https://www.tradingview.com/x/wFWxaww9/

Naspers (NPN): The share is trading at the horizontal support zone, just above the 200-day simple moving average. Traders should monitoring the share for a potential break of the downward channel and short term bullish reversal. Support: 224000c

https://www.tradingview.com/x/ptBjI21m/

Shoprite (SHP): Late last week client were notified of the potential break up of the short term downward trend which is exactly what we saw on Friday. The 8-day EMA has been regained, and, should we see follow-through, the share has the ability to re-test 12900c. 

https://www.tradingview.com/x/9fsN5SjC/

Imperial Logistics (IPL): I would like to see strong price action above 5247c as confirmation that this short term downward trend can be reversed. First upside target is 5470, followed by 5537c.

https://www.tradingview.com/x/8MehYKZ9/

Investec Ltd (INL): Following the massive drop from 9200c, the share trades at support of 7572c.  Should we see 7619 being regained, then 7917 would be a target. Stop-loss: 7405c.

https://www.tradingview.com/x/495L1ZNd/

Large Caps – Price vs 1-Month High

Large Caps – Price vs 1-Month Low

 

Charts of Interest

An image

Source: FactSet

An image

Source: FactSet

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