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NEWSLETTER 14/05/2016 (484) Good day everyone, This week I received a phone call from a friend who have decided to make peace with his parents. For years he was bitter and resented for the way he was treated as a child. This filtered through to his own children and his wife. He phoned them and made an appointment. He went to tell them he forgive them for what they have done and how he regret always waiting for them to apologise and praying that they will realise what they have done to him and how their behaviour have shaped and influenced him as a man. He realised that they may never change but he has the power to change and that started with first forgiving them. I could hear the relief in my friend’s voice, he sounded like a free man! Forgiveness is freedom. ------------------------------------------------------------------------------------------------------------------------------

Our bank details have changed and we would like to, over the next couple of months move

all the transactions to the new account. Please change the details to: Nedbank, Cheque

account Number: 11 22 812 582 Branch code: 198765 Ref: Your name & Surname

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1. TOP 40 COMPANIES – Interpretation of the Technical picture.

What does the long term informed capital think? The monthly line graph implies.

• The possible double top (negative) is still on the table and line A and line B remains support

lines.

• The index is still busy with the possible right shoulder and unfortunately it seems as if the right

shoulder is gaining momentum to the bottom.

• Above line B everyone will be content.

The weekly Ichimuko candle graph on the top 40 index implies:

A

Double top?

B

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• The harami candle (uncertainty) creates uncertainty and above the 200 day moving average

the optimism will remain. Below 44713 profit taking might continue.

• A close below line B (44897) will imply that the momentum to the bottom of the possible right

shoulder might escalate.

• The possible double top (negative) is still with us.

• The Tenkan Sen (green line) remains a resistance.

• The index is trading within the Ichimuko Clouds but the Kijun Sen (black line) and the 200 day

moving average (45350) changed into a support again.

• The index closed in the Ichimuko clouds (indicated in blue on the graph), which highlights the

uncertainty of the long term investor. (Ichimuko clouds are known to reflect the “confidence”

of the investor in the market. Above the clouds they have confidence and below them

uncertainty prevails). The Tenkan – and Kijun Sen represent the 9 and 26 day moving

averages, which is used to support the representation of the Ichimuko clouds. A movement

below these averages are seen as flashing red lights for the medium term investor. The first

warning is when the 9 day (Tenkan Sen) support breaks and when the 26 day moving average

(Kijun Sen) support also breaks, it confirms that the sentiment is negative for medium term

investors. When the two averages cross one another, medium term investors should avoid

the market.

• Strategy – “Uncertain”.

Levels for direction (use the levels on both sides of the level in bold which indicates where the top 40 index can go to in the coming week): 49229 (intraday record high) and 49136, 48861, 48800, 48317, 48195, 48011, 47885, 47935, 47716, 47541, 47460, 47422, 47363, 47236, 47162, 47134, 47053, 47000, 46963, 46932, 46881, 46854, 46740, 46665, 46505, 46410, 46389, 46328, 46286, 46225, 46171, 46130, 46076, 46038, 46000, 45993, 45979, 45858, 45763, 45668, 45616, 45561, 45510, 45403, 45341, 45252, 45102, 45085, 45043, 45026, 45000, 44963, 44929, 44895, 44815, 44788, 44767, 44683, 44642, 44623, 44583, 44547, 44508, 44477, 44454, 44410, 44384, 44347, 44321, 44263, 44244, 44206, 44178, 44129, 44066, 44049, 44015, 44000, 43979, 43922, 43858, 43841, 43789, 43741, 43720, 43647, 43622, 43558, 43510, 43474, 43405, 43384, 43327, 43268, 43253, 43210, 43287, 43245, 43206, 43120, 43056, 42995, 42953, 42912, 42868, 42831, 42772, 42736, 42676, 42638 42581, 42534, 42455, 42400, 42378, 42314, 42278, 42259, 42200, 42157, 42105, 42093, 42025, 42000, 41976, 41912, 41876, 41826, 41761, 41681, 41651, 41537, 41474,

Top 40 index

Harami candle

Ichimuko clouds

Tenkan sen Kijun sen

Double top?

A

B

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41356, 41273, 41148, 41052, 41000, 40963, 40834, 40778, 40729, 40705, 40699, 40587, 40565, 40527, 40461, 40394, 40315, 40245, 40211, 40169, 40131, 40060, 39994, 39905, 39814, 39800, 39774, 39712, 39643, 39542, 39475, 39440, 39371, 39358, 39285, 39244 39200, 39175, 39140, 39072, 39000, 38974, 38904, 38875, 38810, 38756, 38716, 38683, 38652, 38624, 38593, 38560, 38538, 38468, 38422, 38375, 38344, 38310, 38265, 38207, 38177, 38140, 38080, 38039, 38000, 37978, 37945, 37914, 37864, 37802, 37760, 37723, 37648, 37600, 37555, 37511, 37473, 37380, 37214, 37180, 37070, 37000, 36940, 36850, 36772, 36568, 36477, 36444, 36393, 36346, 36300, 36260, 36243, 36227, 36205, 36160, 36120, 36100, 36072, 36064, 36026, 36000, 35937, 35888, 35823, 35793, 35776, 35724, 35681, 35654, 35620, 35600, 35580, 35494, 35482, 35455, 35425, 35381, 35360, 35310, 35259, 35220, 35140, 35051, 35000, 34964, 34930, 34870, 34844, 34818, 34781, 34745, 34720, 34684, 34628, 34587 and 34500. Summary for long-term (3 year +) investor – “Uncertain”

2. INTERNATIONAL MARKETS.

Dow Jones.

The weekly line graph of the Dow Jones implies:

• The flag formation is still in place as long as line A (17535) remains a support. Take note how

the index closed on the line.

• The 200 day moving average (17091) is still a support which is seen as positive.

• Strategy – “Positive”.

3. Index / International Shares (Opportunities and Threats).

Walt Disney Company (DIS) – Nasdaq

Walter Elias Disney was an American entrepreneur, animator, voice actor and film producer. A pioneer in the American animation industry. As producer of the films he received 22 Academy Awards from 59 nominations and he has won more individual Oscars than anyone else. In 1920 he moved to New York with his brother and started The Walt Disney Company. In the 1950’s they expanded into amusement parks. They have a market cap of $166 bn and their revenue for the year 2016 was $12bn. The weekly graph implies:

A Dow Jones

200 day moving average

Flag formation

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• A possible double top (negative) is visible on the graph and the formation will be confirmed if

line A ($91-15) changes into a resistance on a weekly close. The target of the formation should

it play out is $61.

• The support of the 40 week moving average ($103-21) has changed into a resistance which

is seen as negative.

• For traders – If you want to pre-empt the formation go short below line B ($100-36) but use

$106-75 as stop loss to protect capital. If you want to wait for confirmation of the double top

formation only go short below line A but use $95-99 as stop loss to protect capital. If the

momentum below $88-87 continues the targets towards the bottom are $86-25, $85-61 $81-

88, $78-54, $76-64, $73-52, $72-02, $70-02, $68-03, $67-53, $64-31, $62-16 and $61

• For medium to long term investors – Discontinue accumulation as long as the 200 day moving

average remains a resistance and consider reducing exposure to the share when line A

changes into a resistance on a weekly close.

• Note – This week they announced that their Disney Dollar currency will be discontinued at

Disney World and their financial results for 2016 did not impress investors.

---------------------------------------------------------------------------------------------------------------------------- Christelle is a registered broker with SA Stockbrokers. For those that are looking for a broker to

trade the local as well as the overseas markets at competitive rates can contact Christelle at

021 972 1034 or at admin@fransdeklerk.com for more information.

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4. The Rand vs. the American dollar.

The weekly line graph implies:

• The weakness above line A (R15) is still in place.

• Above R15-25 the Rand can return to R15-51. Only below line A and especially below R14-

72 the technical strength might return.

• The 200 day moving average (green line) waits at R14-68.

• Levels for direction (use the levels on both sides of the level in bold to indicate where the

Rand might rise/fall to in the coming week): R8-78, R8-81, R8-84, R8-88, R8-91, R8-94, R9,

R9-06, R9-09, R9-11, R9-18, R9-18, R9-24, R9-27, R9-30, R9-38, R9-40, R9-42, R9-45, R9-

52, R9-55, R9-60, R9-68, R9-77, R9-81, R9-85, R9-91, R10-00, R10-09, R10-11, R10-17,

R10-22, R10-25, R10-30, R10-34, R10-39, R10-48, R10-50, R10-59, R10-65, R10-69, R10-

70, R10-74, R10-76, R10-84, R10-87, R10-91, R10-94, R11, R11-05, R11-10, R11-14, R11-

17, R11-22, R11-27, R11-31, R11-35, R11-39, R11-43, R11-47, R11-58, R11-66, R11-72,

DIS

40 week moving average

A

Double top

B

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R11-77, R11-81, R11-84, R11-87, R11-92, R11-97, R12, R12-03, R12-06, R12-10 R12-16,

R12-20, R12-30, R12-34, R12-39, R12-42, R12-46, R12-52, R12-58, R12-63, R12-68, R12-

74, R12-74, R12-79, R12-81, R12-84, R12-88, R12-93, R13, R13-09, R13-24, R13-28, R13-

31, R13-44, R13-53, R13-59, R13-64, R13-70, R13-81, R13-85, R13-93, R13-96, R14, R14-

01, R14-12, R14-20, R14-21, R14-33, R14-39, R14-44, R14-49, R14-60, R14-88, R14-96,

R15-03, R15-25, R15-34, R15-41, R15-77, R15-97, R16, R16-03, R16-19, R16-21, R16-45,

R16-76, R16-84, R16-85, R16-88 and R16-95 (recent high).

• Long term technical view - “Negative”.

5. TECHNICAL ANALYSIS /QUESTIONS.

The Dow Theory (continues – Principal 1):

The First principle of the Dow Theory suggests that averages discounts everything. This suggests that all information or facts are already reflected in the current price of the market and any fresh news are rapidly incorporated. In other words the Dow Theory suggests that the Dow Jones Industrial index reflects the emotion of investors, the interest rate data, the pending earnings announcements and market risks. This index is in other words a reflection of the health of the US business activity and its movements reflect the views and forecasts of buyers and sellers.

To be continued...

6. LOCAL SHARES/INDEXES THAT CATCHES THE EYE.

We are currently busy with the Dow Theory in the technical section every week. Richard Russell, a technical analyst, who passed away in November 2015, was also inspired by this theory and he wrote a weekly newsletter called the “Dow Theory Letters”. I loved his newsletters and his technical insight was always outstanding.

We are slightly running ahead of ourselves but this week we want to look at the principal which suggested that the Transport index and the Dow Jones Industrial index together implies the trend of the market. The graph below illustrates that the trend has changed for both these indexes. The only difference is the Dow Jones Industrial Index is the one which still consolidates above its 200 day moving average.

The weekly graph implies:

• Lower highs (negative) and a possible small double top is visible on the Dow Jones

Industrial index.

Rand vs. $

A

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• The 200 day moving average on the Dow Jones is still a support (see previously in the

Newsletter par. 2). This is as a result of the manipulation by the US Federal Reserve which

prints cheap money (fiat money).

• The 200 day moving average on the Dow Transport Index is already a resistance. The

lower highs on this index implies that the American economy is not growing at the

expected rate.

• For traders – Use the volatility around the 200 day moving average to trade.

• For medium to long term investors – The local market also has lower highs visible, along

with a possible double top and the head and shoulder (warning formations). Technically

exposure should be reduced on the US market below the 200 day moving average and

the same technical principals should be applied on our local market.

• Note – The US have painted themselves into a corner with all the stimulus or fiat money

which they pumped into the market. For the past 8 years the institutions used the Fed’s

money to buy the market. The cheap money never ended up in the hands of Jo Soap.

The institutional transactions resulted in the long bullish trend but, it seems as if this trend

is running out of steam. Interest rates should be increased but if they do it too quickly their

economy might hurt even more because Jo Soap is after all the fiat money still not in a

better place financially. The earnings of companies are not enough to validate the high

share prices and several analysts are predicting a recession for the US in 2017 if things

don’t change soon. On our local ground we should also be careful when our market

continues to consolidate below the 200 day moving average and investors should not

disregard the warning signal when the top 40 index eventually starts to consolidate below

41000.

8. OPPORTUNITIES AND WARNINGS (for medium and long term investors)

BUY (stop loss indicated in brackets) – Accumulate Sirius above R8-45 (R7-90), Metair above R22-90 (R22), accumulate PPC above R15 (R14-12), Sephaku above R4-80 (R4-50), hold onto

Esor above 30 cents, accumulate Astral above R131 (R124-09), hold onto Southern Ocean above

Dow Jones Industrial Index

Dow Jones Transport Index

Lower highs and double top?

200 day moving average

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41 cents, accumulate Astrapak above R4-50 (R4-05), accumulate Argent above R4-40 (R3-95),

accumulate Life Healthcare above R37-83 (R35-95), accumulate Mittal above R10-10 (R8-50),

hold onto Atlatsa above R1-10, hold onto York above R2-60, accumulate Keaton above 66 cents

(53 cents), Delprop above R6-75 (R6-31) and hold onto Prescient above R1-05.

SELL (warning level/formation is shown in brackets) – ISA (discontinue accumulation),

Capitec (discontinue accumulation), CIL (discontinue accumulation), Coronation (discontinue

accumulation),Transcap (discontinue accumulation), Bidvest (discontinue accumulation), Santam

(discontinue accumulation), Sygnia (discontinue accumulation), Brait (R153-15), Wescoal

(discontinue accumulation), Sibanye (discontinue accumulation), Truworths (discontinue

accumulation), Attacq (discontinue accumulation) and Rebosis (R10-57).

Speculative Opportunities (long on ssf/cfd for the larger shares) for short term trader (stop

loss indicated in brackets) – Blackstar above R9 (R8-60), Chrometco only above 10 cents (8

cents), Jubilee above 67 cents (64 cents), hold onto Mazor above R1-45, hold onto Dawn above

R4-15, hold onto Altron N above R5-60, Oando above 63 cents (55 cents), Telkom above R58-

45 (R55-50), Purple above 60 cents (55 cents), Texton above R8-50 (R8-15) and hold onto Brent

above $45-10.

Speculative Opportunities (short) for short term traders (stop loss indicated in brackets) –

JSE short only below R156-99 (R167-49).

FINAL THOUGHT

The top 40 index have been fighting the 200 day moving average for a while. The market is still

oversold in daily terms, which means they might easily bounce the market to higher levels in the

short term. However the big question is will they be able to keep it above the 200 day moving

average? If they can’t and 45000 changes into a resistance again we can assume that the next

level to test is 41000.

Regards

Frans & Christelle

“Can the 200 day moving average remain a support.” – Anonymous

• This document contains technical analyses of objective information regarding markets and products. No part of this document should be interpreted as investment advice. The author is not acquainted with the reader’s investment motives, financial position and needs and does not accept any responsibility for loss or damage as a result of the use of these analyses. Such responsibility lies with the reader.

• Do not hesitate to contact the author should you not be acquainted with the terminology. The purpose of this newsletter is to educate readers in technical analyses. • The author is keen to analyse shares on request and presents training in technical analysis. • This newsletter is intended for use by subscribers only. It may not be copied or forwarded, in whole or in part, without the author’s consent. Any person doing so

exposes himself to legal action. “