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The inability of the Top 40 index to breach important resistance levels on the way up means there is now new selling pressure which will increase if the index does not stabilise soon. By midday on Thursday the Top 40 index had already fallen through the first important short-term support level of 42 480.
Economists responded positively to the message of greater austerity and financial discipline in the Medium Term Budget Policy Statement, but the markets were spooked by the dire economic picture painted by Minister of Finance Nhlanhla Nene.
READ: Budget in a nutshell
By midday on Thursday all the major indices were sharply down, with the All-Share index 1.26% lower at 47 598 points while the Top 40 index lost 1.35% to 42 453 points. On Wednesday the All-Share was 0.67% weaker and the Top 40 index 0.81% softer.
The big losers were again resources, with the Resources 10 index 2.02% lower and the Gold index 2.56% weaker after the gold price retreated from its latest highs. The Industrial index lost 1.33% and the Financial index 0.45%.
The mood was not helped by a weaker performance on Wall Street, where some company results did not quite meet expectations.
READ: US stocks drop as winning streak ends
The future direction of the US markets, and probably markets around the world, will be determined by company earnings announced in the next few days.
Imara SP Reid in its daily Market Snapshot on Thursday called the initial failure of the Top 40 index to breach the important resistance level of 43 600 points (it fell short by 20 points) a disappointing short-term development.
This will lead to additional selling pressure, and the analysts said the 42 480 point area represents the first very short-term support level. By midday, the index had already broken through that level.
It suggests some choppy trading as bullish participants are now looking to enter the market at slightly lower levels.
The biggest disappointment is the Resources index, which lost 1.97% on Wednesday after strong indications of technical support, and the pattern continued on Thursday morning.
Some of the big names in the resources sector are now trading at 52-week lows, including various platinum producers. These producers were hit by data showing a sharp fall in Chinese imports of the precious metal, the latest blow for an industry struggling with depressed prices and rising costs.
Official customs data showed China's platinum imports fell 18.5% in September to 8 615 kg, and were down by a similar percentage in the year to date. The spot price fell 0.5% to $1 265.75 per ounce. Chinese growth is now at the lowest levels since 2008.
Among the platinum shares Anglo American Platinum [JSE:], Impala Platinum [JSE:IMP] and Northam Platinum [JSE:NHM] all reached 52-week lows on Thursday, although Amplats and Northam later recovered somewhat.
By midday on Thursday Amplats was another 1.03% down at R359.77, after reaching a low of R351.49. Northam sank to a low of R33.80 and at midday was 2.3% down at R34.00. Impala hit a new low of R79.64 by midday, 1.68% down on Wednesday's close.
Even a heavyweight such as BHP Billiton [JSE:BIL] at one stage reached a new intraday 52-week low. The share price slipped to R286.12 (a 52-week low) on Thursday morning, but recovered somewhat and at midday was 1.38% softer at R289.25. BHP Billiton is now almost 23% lower than the 52-week high reached in July this year.
The good news story of the day was Clicks [JSE:CLS] which improved by almost 3% after announcing that its operating profit in the year to August rose 10% to R1.2bn, topping analysts' estimates. Sales advanced 9.4% to R20.2bn and the company raised the dividend by 13% to R1.90 per share.
By midday the share traded at R66.40, 2.98% higher than on Wednesday. Pick n Pay [JSE:PIK] was only 1c lower at R11.30.
- Fin24
