Last week was quite a volatile week in terms of the ALSI. This seems to mainly due to the drama unfolding with the stepping down of President Jacob Zuma. On Monday last week, it gapped down over 2000 points to bounce off the support level at 49 000. (image 1)
It since bounced off of that support level and has come back down. With the uncertainty of what is happening within the ANC, it seems like it might be quite a sideways day today. At least until the outcome of the NEC meeting is revealed later on today.
With the movement over the last week, a head and shoulders pattern has played out and has already broken through the neckline quite substantially. If it continues to play out, we could see it reaching the H&S target all the way down at 46000 level. This is established by taking the distance between the top of the head and the neckline and extrapolating it downwards from the neckline. (Image 2)
As far as the ZAR is concerned, the ZAR firmed against the dollar ahead of the NEC meeting of the ANC to decide Zuma's fate. We can expect a lot of volatility on the ZAR today and possibly the rest of the week regardless of what the outcome of the meeting is.