The JSE Top 40 Index (JSE: J200) is making strides towards recovery, marking a significant 1.87% gain for the week, potentially signalling its first weekly ascent in 2024.
This positive trajectory aligns with favourable inflation data, creating a conducive environment for the prospect of rate cuts. The allure of rate cuts lies in their ability to elevate equities, offering the promise of reduced interest expenses and more affordable financing for growth initiatives.
Statistics South Africa’s report revealing back-to-back months of moderation in inflation adds weight to this sentiment, with the country’s annual inflation rate dipping to 5.1% in December, from 5.5% the month prior and outperforming the market consensus of 5.2%. Despite this, the Reserve Bank of South Africa maintains a cautious stance, keeping rates stable at 8.25% and highlighting lingering inflationary risks. This cautious outlook prompts contemplation on the potential limitations to the JSE Top 40 Index’s upward momentum in light of the central bank’s vigilance.
Technical
The JSE Top 40 Index displayed a promising shift in sentiment as it recorded back-to-back days of gains, albeit concluding Thursday’s session on a lower note.
This shift was accompanied by the index breaking free from a descending channel pattern that initially confined it to a downtrend. The ascent initiated from the 65262.11 level, marked by oversold RSI conditions, established a robust support level. A significant breakthrough above the 61.80% Fibonacci Retracement Golden Ratio signalled the dominance of bullish forces.
Retesting the 67950.84 resistance level, formed during a mid-January selloff and aligning with the 100-day moving average, underlines the significance of the upside momentum. However, overbought RSI conditions at this level suggest a potential reversal. The 61.80% Golden Ratio could become a pivotal point of interest to the downside if a reversal unfolds. Conversely, a breakout above the resistance level could amplify bullish pressures, potentially paving the way for an advance toward the 69337.95 level.
Summary
The JSE Top 40 Index forges ahead with a noteworthy 1.87% weekly gain, potentially marking its first ascent in 2024. Fuelled by favourable inflation data hinting at prospective rate cuts, equities find appeal. The robust support at 65262.11 and overbought RSI conditions at the 67950.84 resistance level prompt strategic considerations for traders, with the pivotal 61.80% Golden Ratio serving as a key downside point of interest.
Sources: Statistics South Africa, South African Reserve Bank, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
