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WARNING: The deadliest threat to the JSE

by , 03 February 2020
WARNING: The deadliest threat to the JSE
This is not a drill…

The deadly coronavirus has not only claimed over 170 lives at last count and infected 1000s, it's also had a major impact on world stock markets and economies.
  
 
Investors are selling off their positions in equities, and seeking out alternatives like gold, platinum and bonds which have little effect on world markets.
 
And it looks like we are in for a wild ride with the JSE as well…
 
Here’s why I expect the JSE to plunge 10%...
 
 
 
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Reason #1:
When world markets crash, South Africa goes down with it
 
As global markets plunge, history has shown us the JSE will follow suit!
 
Last week alone, global stock markets closed down over 2% in one day because of the coronavirus:
 
London's FTSE: -2.5%
European Stoxx: -2%
France’s CAC: -2%
Germany's DAX: -2.5%
Shanghai Composite: -2.7%
Japan's NIKKEI: -2.2%
 
The JSE : -2.7%,
 
And with the rate that the virus is spreading on a daily basis, the world markets will continue to drop as investors flee away from stocks due to the uncertainty and fear the virus can bring to the companies.
 
Unfortunately, we’ll need to wait it out until we see the number of cases (from the virus) start to slow down – before we see a market rally again.
 
Reason #2:
Drop in Chinese visits
 
As the global outbreak has spread to over 13 countries, including the US, there are serious measures being implemented to try to contain the virus.
 
And as the virus continues to spread, South Africa will eventually feel the impact.
 
In fact, Efficient Group Chief economist Dawie Roodt explained that South Africa will be affected in three ways…
 
“The first is through the real economy if other countries start closing borders, affecting trade and tourism. The second is through the financial markets and its impact on commodity prices and exchange rates. The third is if the virus also arrives in South Africa,”
 
With less international travel, with fewer businessmen and tourists arriving in South Africa, this will cause a disruption to the economy.
 
This is because Chinese tourism has become a major source of foreign exchange income for South Africa.
 
Finally… - my charts confirm it!
 
Reason #3:
The charts point to double-digit losses on the JSE
 
 
 
Looking at the daily chart of the JSE, it’s been forming in a negative triangle formation for the last two years.  
 
Based on the global reasons above, I now expect the price to break below the bottom of the triangle at 55,000.
 
Once this happens, selling pressure and panic will kick in and cause the price to drop to the bottom of the triangle.
 
In this case my first target to hit is down 10.9% at 50,405.
 
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Here are three ways to profit!
 
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Trade well,
Timon Rossolimos,
Analyst, Red Hot Storm Trader


WARNING: The deadliest threat to the JSE
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