The stock market, which has cushioned share market investors from the ravages of a falling rand, has turned against us, but there is a gleam of hope on the horizon.
For around three years, up until September 1, we stock market investors have contented ourselves with a swings and round-about scenario, rand against the share market. As the rand has lost ground, the stock market has risen; one compensating for the other. But since Spring burst forth, while the rand lost almost 4%, the JSE-Overall dropped almost 6%, reducing both the value of shares, and the currency in which they are quoted.
My search for encouraging charting signals with regard to the stock market yielded little but as world markets are all currently heading downwards and our own, most oversold for three years, The JSE Overall index will only alter direction when the rest do. The depressing news comes with the overlay of a Bollinger Band, set at a tight deviation of “1”. The currently extreme width of the band shows high volatility. From September 22 volatility took the plotting downwards outside the band indicating that the downward move is likely to continue.
Rather than the market, it is the rand that has me glued to my computer screen. While the rand’s Bollinger Band plotting is also wide, it is less volatile. The improvement in value seen since October 3, is likely to continue taking the plotting down to the lower edge of the band. But the thing that has me fired with optimism is the point-and-figure chart that shows last week’s broken triple bottom at $1/R11,21. If forecast theories from such a move play out to their full, this will take the rand to below $1/R9. Looking at the fundamentals, the only reason I can imagine would prompt this is the ousting of our currency’s worst enemy, Jacob Zuma.
Just imagine what this currency improvement would do for the country as a whole. There has been a 20% drop in the oil price since its June high, but with the rand’v value falling by 5,4% during this period. petrol and diesel prices have enjoyed limited reduction. But, if the rand significantly improves against the dollar, every item that travels by road, and every bit of agricultural product, grown on our farms, can fall in price. The richest BMW driver and the poorest benefit drawer will have more money to spend.