I recommend to everyone in the market to have their own position or their own opinion, which, of course, may differ from the views of the majority. Nevertheless, if it is conditioned by logical arguments on which one can rely upon the fulfillment of certain conditions, there is nothing wrong with having to, figuratively speaking, stand against the crowd.
Today it is quite fashionable to “be for the crisis and for the collapse”. From all the screens, one can only hear that: the bubble on Nasdak, the SP500 will form, a collapse and lows await us in Russia, etc. etc. Simply put, some emotions, news and negativity from all screens.
There are prerequisites for this and this cannot be denied, namely:
- there is indeed a bubble in the US tech sector. Overbought in this sector is already reaching enormous proportions, and this psychologically puts pressure on all market participants;
- in the wake of a bubble in America, there will be a collapse in our market, which, of course, also looks quite real;
- negative consequences of the coronavirus crisis, which has not yet ended and the lockdowns and borders have not yet been opened; life and public relations have not been fully restored;
- political risks of sanctions from the new US administration, and EU sanctions on Navalny, Nord Streams, NATO expansion, etc.
Certainly, there are still a number of negative factors, respectively, affecting the Russian markets. Hence, pessimistic forecasts and such kind of candles appear on the monthly charts of the MICEX:
Notice how disgustingly closed the monthly bar on the Moscow Exchange index. Technically it looks very bad, of course. It is difficult to remain optimistic about the Russian market with such a close on the monthly chart of the index.
Now, I will try to offer my vision of the development of the situation. In doing so, I understand that it is not the truth in the first instance. I meditate in a weekly mastaba, which is a major time frame.
I’ll start with such a basic thing as determining the phase of the market.
What is the trend on the MICEX now? Let’s turn to the weekly chart.
From the weekly chart of the MICEX we see an already formed growing trend, this gives me reason to be convinced of the continuation of the trend. However, the levels are marked on the chart, if the situation goes according to a negative scenario, how will I react to it. If this happens, I indicated the level at which I will reduce the positions of my portfolio. This is level 3166.
Since, I understand that the maximum program for this correction can be the execution of the closing of the post-election Gaps in November 2020, the index may well go down to 2657. And if it stays higher, I will look for points to build up the portfolio again.
At the same time, my outlook on the market remains positive, despite the fact that I have a critical point for myself, at which I assume a planned reduction in positions. And my optimistic view is based on the following arguments:
one) Good closing of the week on the MSCI Russia index. This index is very important for analysis and forecasting, since it is the composition of this index that foreign investors look at when they place their money in Russian assets. See graph.
The graph clearly shows that the 655 level is being held well and this gives grounds to rely on the fact that the sentiments of foreign funds are rather positive. This means that it will be accompanied by an inflow of foreign capital to the Russian market;
2) Breaking down the 10 year trend in commodity prices. Here is a fragment of the Bloomberg commodity index chart.
This is a snippet of the Bloomberg commodity index weekly chart
It can be seen from the graph that since March 2020 there has been a change in the trend that broke the old one that had existed more than 10 years before. Of course, a correction even on the given fragment of the chart is possible and even quite real; nevertheless, it is also obvious that it is a correction that is more likely than some kind of global collapse in commodity prices.
3) Russian export structure in 2020 This is from the category: “there would be happiness, but misfortune helped.” I will give two diagrams prepared on the basis of data from the Federal Customs Service of Russia.
According to the Federal Customs Service of Russia for the first half of 2020. According to the Federal Customs Service of Russia for the first half of 2020.
From the histograms it becomes clear that the very, for many, sad, raw materials orientation of the Russian economy should play the most positive now, more than ever, and a protective function against the fall of both itself and its stock market. In other words, how should the economy feel in the context of rising prices for raw materials, in which the share of exports of this very raw material is 78.5%? The question is rhetorical, agree.
Thus, the negative background in all financial markets and the Russian one, in particular, has its own objectivity and this must be accepted and recognized. There are risks of a deep correction, but is it scary for us, as participants in positional trading, probably not? And there are a number of very good reasons for this, which I presented in the article. And besides, on the chart I have depicted a model of my behavior with my portfolio, where, how and at what levels I will adjust my portfolio.
With you was Alexander Perfilov, manager of the strategy “Market View v.5” on the comon.ru portal
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