Johannesburg - The major indices on the JSE hardly moved on Wednesday morning, but commentators say interesting times lie ahead after the market’s strong performance on Tuesday against all expectations and technical forecasts.
All the major indices were again higher by midday, although some of them hardly moved. At that stage the All-share index traded only 0.39% higher at 52 643 while the Top 40 index was 0.46% stronger at 47 134 points.
The best performer was the resources sector, which was 2.20% higher after gaining 0.73% on Tuesday. The Financial and Industrial indices both gained only 0.15%, while the Gold index was 0.31% higher despite a lower gold price.
Imara SP Reid said on Wednesday morning in its daily Market Snapshot that the Top 40 index reversed its recent deterioration in short-term metrics to trade back ahead of the 65-day moving average. This follows Tuesday’s brisk upside momentum, which witnessed the index close up by 1.73%.
There are now interesting resistance levels waiting for the index and a break beyond this level on high volume support would represent the most significant development for local equities since the third week of April.
Tuesday’s brisk move has provided the Top 40 index with the first potential possibility for a break to the upside from a technical perspective, but the fundamentals of the domestic market remain questionable.
This is particularly true of the resources sector as the dollar remains strong and commodity prices remain under pressure.
The weak rand may however provide some support for the resources and industrial shares, which earn most of their income abroad, as they will earn more in rands.
The rand touched a fresh 14-year low against the dollar on Wednesday amid concerns about the ailing local economy and after a US Federal Reserve official backed a US rate hike next month.
READ: Rand hits fresh 14-year low as economy struggles
Investors are worried that economic growth has remained subdued since a 2009 recession with output seen below 2% this year, partly due to the electricity crisis.
Among the top resources shares, BHP Billiton [JSE:BIL] was 3.08% stronger at R236.35.
SABMiller [JSE:SAB] was 0.34% higher at R674.40 but Naspers [JSE:NPN] lost 0.19% to R1 798.50. Sasol [JSE:SOL] was also 0.74% lower at R424.39, with the price of Brent crude oil as low as $50.33 a barrel.
Investors started taking profit after Brait’s [JSE:BAT] incredible run of the last month or so and the share lost 6.87% to trade at R148.54, R10.96 lower than its recent high of R159.50. Before Tuesday morning’s sharp drop Brait was 14.07% higher for the past seven days, 42.17% stronger over the past 30 days and an incredible 99.38% better off over 90 days.
Brait’s strong run began after it became a major shareholder in Steinhoff [JSE:SHF], but Steinhoff was steady on Wednesday morning and gained 0.66% to R77.91.
Nedbank [JSE:NED], which led financial shares higher on Tuesday after solid results, fell back on Wednesday morning as traders took profits. The stock, which at one stage on Tuesday was more than 5% higher, by midday was 3.09% softer at R262.64. On Tuesday it closed at a new record of R271.02.
There is still a great deal of interest in retail shares. Earlier in the week Woolworths [JSE:WHL], Clicks [JSE:CLS] and Famous Brands [JSE:FBR] all traded at new 52-week highs. On Wednesday morning Pick n Pay [JSE:PIK] and Spar [JSE:SPP] both set new records. Pick n Pay traded 1.33% stronger at R60.27 and Spar was 0.80% higher at R233.71.