After the JSE experienced its biggest one-day drop in nine months on Monday, the decline continued on Tuesday morning and the All-share index and the Top 40 index both again lost more than 1% in morning trade. On Monday the All-share index dropped 1.9% and the Top 40 index 1.99%.
In the process some of the indices fell through important support levels and analysts warn the immediate future direction of the market will be determined by how soon they will be able to recover.
On Monday the JSE was led lower by resources stocks, which lost almost 3% due to fears about the latest Chinese manufacturing statistics, but on Tuesday the big losers were the Financial and Industrial indices which were both more than 1% down.
Resources held their own after the latest Chinese purchasing managers' index results on the manufacturing sector were better than expected.
The downward move on Tuesday was accentuated by Wall Street which finished decisively lower on Monday, retreating from last week's records in a decline attributed to profit taking and anxiety about Chinese economic growth.
The European markets also followed Wall Street lower.
Read: European shares dip on China growth nerves
By midday the All-share index was 1.26% lower at 49 849 points and the Top 40 index lost 1.22% to 44 691. Shares started the day lower and the intraday-graphic pointed downwards for most of the morning.
The Financial index was 1.73% weaker, while the Industrial index gave up 1.52%. Resources stabilised after Monday’s big drop and traded only 0.18% softer.
The All-share index has mostly traded between 51 000 and 52 000 for three months and Tuesday’s move to below 50 000 can be decisive if the market does not recover quickly.
The most important shift the last two days was the Top 40 index's move to below the important support level of 45 540. The technical analysts of Imara SP Reid said in their daily Market Snapshot that future support in the next few sessions will be important, as an inability to move back beyond this import support level will almost certainly indicate additional selling pressure.
Imara SP also noted that the 65-day moving day average of the Top 40 index turned negative for the first time since the last week of January, which calls for circumspection. Technically the JSE is oversold but the downward moves are bigger than expected.
It seems that markets worldwide are ready for a breather. The Dow Jones Industrial Average dropped 0.62% on Monday and the broad-based S&P 500 fell 0.80%, while the tech-rich Nasdaq Composite Index sank 1.14%.
Read: US stocks retreat from records, Nasdaq down
Sam Stovall, chief investment strategist at S&P Capital IQ, said investors "were in need of some near-term rest" after the Dow and S&P 500 hit new record highs last week amid a stay-put Federal Reserve policy decision, the Scottish vote against independence and Chinese internet giant Alibaba's record initial public offering.
"People are taking profits," said Michael James, managing director of equity trading at Wedbush Securities.
Analysts also cited a surprising decline in US existing-home sales in August. Homebuilder stocks fell sharply after the National Association of Realtors said existing-home sales fell 1.8% in August, following four straight months of gains.
Among the major banking shares on the JSE Barclays Africa [JSE:BGA] lost 2.1% to R155.19 and Standard Bank [JSE:SBK] traded 1.91% lower at R133.40. Barclays Africa lost 6.8% over the last week and Standard Bank 7.2%.
Capitec [JSE:CAP] gave up 1.54% of the gains of the last few trading sessions and traded at R236.01. FirstRand [JSE:FSR] was 1.38% softer at R43.00.
Among the major industrial shares Richemont [JSE:CFR] sank to another five-week low when the share price declined by 0.81% to R95.65. Stocks are now 5.6% weaker for the week after the company warned about slower sales growth in Asia, its biggest market.
Naspers [JSE:NPN] lost 2.54% to R1 267.17 and SABMiller [JSE:SAB] was 1.02% softer at R628.12. British American Tobacco [JSE:BTI] weakened by 1.42% to R647.81.
PPC [JSE:PPC], which lost more than 8% of its value on Monday on news that CEO Ketso Gordhan had resigned after differences with the board, gave up another 0.67% on Tuesday and traded at R29.80.
Now read: Why Ketso Gordhan could have resigned
- Fin24