I want to start my review with the fact that even though we all knew that there would be a second wave of coronavirus, countries and people were again not ready for this.
The same applies to the stock market, all summer long the investment house was warned that after a sharp landing in February-March, according to long-term statistics, another wave of decline appears, usually on the horizon of 4-6 months, but even here the players were not ready.
I confess that while the decline was developing rather slowly, it is especially worth noting the period from September 16 to October 20, it seemed that we would get off easy. But it was not there. In the course of yesterday’s trading, several stocks broke through their long-term consolidations down at once, giving a request for a deeper dive. Among them are the securities of Rosneft and GMK, and I also expect a stronger decline in the shares of Sberbank, as they left the limits of their growing trends since March even after the dividend cut.
In addition, Gazprom shares are already trading below the March lows, and I would name the shares of Tatneft, Lukoil, Aeroflot among the candidates for an early renewal of the lows of the year. As for the Moscow Exchange index itself, due to other stronger securities included in its composition, it will be much higher than the March levels.
I have several options for the development of events in the near future – the option of a soft and hard landing. And it will depend on the outcome of the US presidential elections on November 3.
Soft option. This is Trump’s victory, although I’m certainly not a fan of him, but at least we know what to expect from him. Moreover, the most likely, regardless of who wins, is the adoption of a new stimulus package after the elections. That is, this is a postponed positive, which may arrive in time by the end of next week or a little after. For Russia, this is also a reduction in geopolitical risks.
In this case, I believe the market may be limited to a decline to the level of 2610-2615 points according to the Moscow Exchange index and the level of 990-1010 points according to the RTS index.
The 2615.73 point mark is a 161.8% extension from wave 1 (A), if the current fall from 2990.74 points is wave 3 (or C). Similarly, for the RTS index: wave 3 (or C) gives 161.8% of wave 1 (A), the target is the level of 1010.68 points.
Hard option assumes the victory of Democrats in the presidential elections and the US Congress. For Russia, Joe Biden’s presidency is fraught with new sanctions and increased market volatility. It is possible that we will play out in advance the alleged negative reaction to the election results.
Then the Mosbirzh index may descend to the area of 2380-2400 points, and the RTS index to the level of 850-855 points. In this case, we consider 261.8% elongation.
Conclusion: If Uncle Trump wins, after the current drawdown, many securities will look quite promising in both the short and medium term. And then there will be not only technical, but fundamental sense to look closely to purchases. It won’t be long to wait, so patience friends, patience!
Scavo (Ignatenko) Anastasia