Good morning friends!
Yesterday we saw a very strong rebound in America, the buyout of everything industrial in particular. Does this tell us that the correction indicated at the beginning of the week is over? So fast? Remember “Bohemian Rhapsody”, there is a producer who did not want to broadcast the song of the same name by Queen, he motivated it like this: “Yes, it lasts for 6 minutes, that is, for an eternity.” To which Freddie Mercury answered him: “your poor wife, if for you 6 minutes is eternity”.
So, the correction that was indicated lasted forever – one day? No, at least for Russia it is not finished yet. In my opinion, it will last at least a couple of weeks. The point is that I continue to focus on the following points:
Raw material prices.
World commodity prices are reflected collectively by the Bloomberg Commodity Index. He is currently drawing a local spread. Globally, it changes its trend from “falling” to “growing”. But now it is awaiting, rather, a correction.
The value of the dollar.
A local uptrend on the dollar index has now been identified. This says only one thing, the demand for dollars is now present. When the demand for dollars prevails over its supply, the markets go to a correction, and, above all, emerging markets. And while the local trend in the dollar index is upward, the market correction will continue.
Key rate increase
The expectation of an increase in the key rate of the Central Bank of the Russian Federation on July 23, 21, always puts pressure on the market. Because, this always creates an increase in the value of money, which means a decrease in money in circulation. The purpose of the regulation of the key rate is exactly this. Limit the money supply through the cost of the loan. Therefore, there will be less money, in principle, there should be less money in the market. Less money in the market, there should be a correction.
MICEX and RTS have broken through the lower limit of their ascending channels. And now, the development of a downtrend is possible. They, of course, can return to their ascending channel, but so far the probability of a decline is greater. At the very least, it takes time to understand that the downward correction does not intend to develop.
While the wind, in my opinion, is blowing in the corrective direction. This suggests a more cautious period for new purchases. A correction does not mean a decline in everything that is on the market. We trade specific securities in which there are levels and interests of investors. I use the indices and their analysis as an indication of the weather. You understand that if it is raining outside, there is also a chance of getting wet under an umbrella, but it is much less. This is me talking about individual securities, which can behave very bullish even during correction due to the presence of high interest on the part of the large stock in them.
Now I see interest in Rusal, ferrous metallurgists, and Yandex. But there are papers that look even better. Therefore, even when analyzing indices, we should trade only the real securities of our portfolio and make decisions only based on the picture in them.
That’s all for now, good luck to everyone.
With you was Alexander Perfilov, the author of the telegram channel “Look at the Market” @perfilov_invest.