South African Stocks Battered By Risk-Off Sentiment

The JSE Top 40 Index (JSE: J200) stands as a barometer of South Africa’s leading blue-chip companies, reflecting the pulse of the nation’s stock market. However, this esteemed index has faced headwinds in recent trading sessions, trading 3.17% lower week-to-date. This downward trajectory threatens to halt four consecutive weeks of gains, a trend exacerbated by global uncertainties. 

Heightened tensions in the Middle East coupled with market scepticism surrounding the Federal Reserve’s monetary policy decisions have dampened investor sentiment. The recent uptick in U.S. inflation to 3.5% has led to reduced expectations of a Fed interest rate cut in July, with speculation now pointing towards a potential cut in September. 

Consequently, risk assets have suffered, while safe-haven assets like the Greenback and Gold have garnered increased attention. Against this backdrop, traders remain vigilant, closely monitoring geopolitical developments as they navigate the intricacies of the markets.  


The JSE Top 40 Index experienced a tumultuous start to the week, marked by a strong selloff that sent shockwaves through the market. This bearish sentiment was underscored by the index’s recent move below its 100-day moving average, confirming the presence of significant selling pressures. 

Initially, support emerged at the 65416.30 level, providing a base and driving the index higher. However, this upward momentum faltered as the index approached the 69968.32 mark, leading to a downturn and the establishment of a resistance level. 

As selling pressures intensified, the JSE Top 40 Index retraced to the 61.80% Fibonacci Retracement Golden Ratio, highlighting the depth of the market correction. Should sellers maintain their dominance, the 65416.30 support level may face renewed scrutiny as a potential retest looms on the horizon. Conversely, a resurgence of upside momentum could see the index reclaiming ground, with the 50% Fibonacci level representing a key threshold for bullish aspirations. 


Amidst global uncertainties and heightened risk-off sentiment, the JSE Top 40 Index faces significant challenges, trading 3.17% lower week-to-date. With support at 65416.30 potentially tested again if selling pressures persist, traders closely watch for market cues, eyeing the critical 50% Fibonacci level for signs of a bullish reversal. 

Sources: Reuters, CNBC, TradingView 

Piece Written By Nkosilathi Dube, Trive Financial Market Analyst 

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