The JSE Top 40 Index (JSE: J200) is on a roll, marking its third consecutive week of growth, now up by 0.59%. It’s been a steady climb, with gains of 2.56% and 3.81% in the preceding weeks. Riding the wave of a weakened South African Rand following recent economic data releases, the index is swiftly approaching a crucial psychological threshold that could dictate its future direction.
Economic indicators, like South Africa’s PPI, showed an expected increase from 5.1% to 5.8% this week, while the budget deficit expanded marginally from R40.57Bn to R41.23Bn. Looking ahead, all eyes are on the upcoming release of South Africa’s GDP growth figures next week, which are anticipated to influence the market direction for the JSE Top 40 Index.
Technical
On the 1D chart, a rising wedge pattern has emerged, with the dynamic resistance of the wedge aligning with the 61.8% Fibonacci retracement golden ratio at 69.851.95. The index is showing signs of persistence, pushing through this pivotal resistance, but with Jerome Powell’s speech looming, there could be some volatility to end off the week.
If the price remains above this resistance sustainably, the uptrend could continue. Resistance at 71,069.57 could be the first hurdle to the upside, potentially triggering a temporary retracement if the breakout occurs. However, if the momentum is sustained above this resistance, then higher resistance at 72,002.99 and 72,700.12 could halt the momentum.
Alternatively, if the price fails to stay above 69,851.95 sustainably, a wedge breakdown remains in play. The Fibonacci midpoint at 68,607.34 could then be the key level to watch out for, backed by the 100-SMA (orange line), which could require a large volume selloff to drive the price lower toward the demand zone at the 25-SMA (green line) of 67,408.45.
Summary
On track for its third consecutive week in the green, the JSE Top 40 Index awaits comments from Jerome Powell later on Friday, which could trickle through to the equity market. Resistance at 69,851.95 is the critical level to watch in the upcoming session, as a sustainable breakthrough could prevent the possibility of a breakdown at the rising wedge as we advance.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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