logic, but by irrational and emotional human beings. And just as we have cycles in nature( night and day, ebb and flow, high tide and low tide, winter and summer), so there are cycles in human nature, and these are especially seen in financial markets.
So, instead of the markets moving in a straight line, they move in a zigzag fashion, thanks to the emotionally opinion). Just a week or so after the taxpayer-funded, circus performance in the form of a State of the Nation address( which merely displayed the true state of the nation to the whole world), everyone thought this was the end for the economy and the currency. The Rand strengthened, however, hitting its best levels since October 2015. charged decisions of millions of people. These emotions swing from one extreme( hope and greed) to the other( fear and despair), and drive the market to trend and countertrend in larger and smaller degrees.
The 11th of January 2016 ‒ when the Rand peaked at 17.81 ‒ was a classic example of an extreme of Rand negative sentiment, which had been reached on multiple time frames. At this point, there was no-one left to turn Rand negative, and it was time for the tide to turn. Which it did. Sharply. And, for the majority, very unexpectedly.
But if you were following the patterns of sentiment, which our Elliott Wave model does, the analysis at that point was suggesting a move down into the 14.55 to 12.50 area ‒ with an interim bounce-off support at around 14.00( per the below chart). Yes, this was contrary to all opinion ‒ could you find one Randpositive person around then? But instead of this making us doubt our analysis, the overwhelming doom and gloom that abounded instead confirmed our view that an extreme had been reached and a major change in trend was in play.
Which of course has played out against a year of extremely negative events and outlook. So far, 2017 has already shown us that the Rand has not lost its uncanny ability to surprise( and move contrary to popular
So, what further surprises lie in store for the balance of 2017? Plenty no doubt. Against this background, how does one plan for the months ahead? If you understand just three things, you will be better prepared than 95 % of investors and business-owners:
• The Rand will not move in a logical manner, or as is generally anticipated.
• We ALL naturally make emotionally charged decisions. But if you let your decisions dictate your business or personal foreign exchange decisions, you will likely make the wrong decision ‒ every time!
• The stronger the general consensus is that the Rand is expected to move in one direction, the more likely it is to move in the opposite direction.
Understanding these is imperative but to keep your emotions in check, which isn’ t easy to do when the Rand is on the run, you need to have an objective view and strategy to make educated, informed and unemotional investment and currency decisions.
RESOURCES
Dynamic Outcomes
www. reimag. co. za MARCH 2017 SA Real Estate Investor 59