Merval index: Bearish time at mode trend signal and fundamentalsIn this thread I'd like to discuss my current forecast for Argentina's Merval index.
Price expanded range down and crossed below the yearly average last week, after the Government was forced to make speculators use the official dollar rate to valuate their assets in the local market, beause of the decline of foreign reserve currency. Instantly many big speculators started selling and made the index crash 3 days ago.
This also impacted the unofficial exchange rate of the 'contado con liqui' dollar, which is a way to obtain dollars by buying stocks or bonds and selling them in foreign exchanges. With the strict government controls on foreign currency, there's a huge market revolving around this, which fuels the 'dollar blue' rates, which is a black market cash dollar you can buy without abiding by the government's limits and regulations.
The official rate is 70% lower than this last one.
Some key dates to keep in mind, from: bakerinstitute.org
"October 25 – Federal Election Day and Local Elections in 11 Provinces
On October 25 Argentina will hold its presidential election as well as elections in eight provinces to elect a total of 24 senators (one-third of the Senate) and elections in all 23 provinces and the city of Buenos Aires to elect 130 deputies (one-half of the Chamber of Deputies). Simultaneous gubernatorial, provincial legislative and mayoral/city council elections will be held in 11 of the country’s 23 provinces, including the province of Buenos Aires, which contains 39 percent of the Argentine population.
November 22 – Presidential Runoff Election
If on October 25 the first-place candidate does not win either more than 45 percent of the valid vote or at least 40 percent of the valid vote and at the same time finish more than 10 percent ahead of the second-place candidate, a runoff election between the top two candidates from the first round will be held on November 22. The candidate who receives the most votes on this date will be elected president for a four-year term and assume office on December 10."
I expect to see massive volatility in my local currency, the stock and bond markets in the coming months. Sadly it's not looking good at all.
On a technical basis, forecasting will be relatively easier once we clear the recent weekly low or high.
If price remains inside this range, then we might witness sideways action until the elections are out of the way (this is what I expect).
Regards,
Ivan.
