The JSE Top 40 Index (JSE: J200) has embarked on a tumultuous journey in the opening week of the year, relinquishing 3.26% of its value, effectively erasing the hard-earned 5.26% gain accumulated throughout 2023. This abrupt reversal has been catalysed by a global selloff in equities, triggering cautious sentiments among investors.
The enthusiasm that once surrounded anticipated rate cuts, which significantly bolstered equities in the latter part of 2023, seems to have cooled. The shift in investor perceptions is evident as bets on the Federal Reserve’s rate-cutting trajectory for March have retreated from a 73.4% probability to 62.7% in just a week. Consequently, this altered sentiment has propelled global capital toward safer havens, resulting in a strengthening Greenback and a stumble in global equities, including the South African market.
Today, all eyes are on the crucial nonfarm payrolls, pivotal in assessing the US labour market’s health. The outcome may influence considerations for rate cuts in the world’s largest economy, shaping future market trends.
Technical
The recent movements within the JSE Top 40 Index have painted a picture of both resilience and vulnerability. Following back-to-back days of decline, Thursday’s trading session brought marginal gains. A year-end rally surged from a foundational support level at 66171.76. This upward momentum pushed the index beyond the 100-day moving average, indicating an emerging uptrend. However, reaching the 70720.91 mark introduced downward pressures, triggering a subsequent downturn that steered the index toward the significant 61.80% Fibonacci Retracement Golden Ratio.
A breakdown with substantial volume beneath this critical level could intensify downward momentum, potentially leading to a retest of the 66171.76 support. Conversely, if the Golden Ratio stands firm as an interim support, a reversal might be on the horizon. Bullish sentiment among traders could prompt an upsurge, potentially targeting the 70720.91 level as a point of interest for potential upside movement.
Summary
The JSE Top 40 Index faces a challenging start in 2024, shedding 3.26% after a robust 2023 gain, reflecting global equity turbulence. Investor caution prevails amid cooled rate-cut hopes. Technical analysis shows a pivotal juncture; breaching the Golden Ratio could signal deeper declines, while its hold might hint at a potential market reversal.
Sources: JSE, CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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