The JSE Top 40 Index Futures (JSE: J200) are experiencing a bullish surge, extending gains for a seventh consecutive session. This positive momentum comes despite a recent contraction in South Africa’s manufacturing sector, as indicated by a declining Absa Purchasing Managers’ Index (PMI) for March. The PMI reading of 49.2 suggests sluggish demand, potentially raising concerns about the broader South African economy.
However, market sentiment appears to be prioritizing other factors. The JSE All Share index’s positive performance is likely driven by resource-linked stocks and global investor optimism. The upbeat global economic outlook, fuelled by positive manufacturing data from other economies, seems to be outweighing the concerns stemming from the weak South African PMI.
Technical Analysis
The 4-hour chart shows that the index’s technical outlook is bullish. The index is currently trading at R68,637.74, hovering near a key resistance level – the 61.80% Fibonacci retracement level. A break above this level on significant volume would be a strong bullish signal, potentially opening the door for a test of the 78.60% Fibonacci retracement level (R69,552.90) and even R70,720.91 in the short term.
Supporting the bullish case is the price action trading comfortably above the critical 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line). This suggests a positive uptrend and increasing buying pressure. Additionally, the RSI (73.36) is currently hovering in overbought territory, indicating strong bullish momentum.
However, a retreat from these levels could signal a potential short-term pullback, with a sustained retracement likely to leave the 50.00% Fibonacci retracement level (R67,994.25) firmly in play. A break below the initial support on significant volume could confirm the bearish momentum, likely leaving the 38.20% Fibonacci retracement level (R67,350.75) and 23.60% Fibonacci retracement level (R66,554.57) within the bears’ reach in the short term.
Summary
The JSE Top 40 Index Futures are in a bullish technical setup, extending gains for a seventh consecutive session. The positive global economic sentiment seems to be overshadowing concerns about the weak South African PMI. A break above the 61.80% Fibonacci retracement level on significant volume could confirm the bullish momentum. However, the overbought RSI suggests a potential pullback.
Sources: TradingView, Trading Economics, Reuters, Bureau for Economic Research (BER).
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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