With all the turbulence on the South African political scene it has been difficult to discern the direction of the JSE over the past year. The JSE Overall index has moved sideways while the markets of the world, and especially Wall Street have been making new highs.
Consider the chart:
The optimism of March, April and the first half of May suddenly gave way to renewed negativity, probably because the Minister of Mineral Resources published a ridiculous third version of the mining charter which has driven investors away from South Africa and wiped about R51bn off our resource shares.
That took the JSE Overall index all the way back to its previous support level at about 50800. At that level there has been considerable support resulting in what technicians call an “island” formation. An island usually occurs after a steep fall resolves itself into a period of “backing and filling” until the uncertainty and fear is driven out of the market by bargain hunters – then there is a strong recovery as investors pile back into shares at the lower levels.
The JSE Overall’s island was broken convincingly yesterday (Monday 3rd July) when it made a strong positive candle.
In the previous article we suggested that the JSE was due to do some catching up with other world markets and that it was relatively under-priced at current levels.
It seems likely that the S&P500 index will make a new record high now that the U.S. Independence Day holiday is over. The S&P looks quite ready for an upside breakout following the recent correction:
You should be positioned to take advantage.