JSE Top 40 Index: Bullish Tone But Ultra Short Term Momentum Waning
- Lester Davids
- 23 hours ago
- 2 min read
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Coming into this week, the price action model pointed to a 'STRONG' 7-day trend combined with a 'BULLISH' 14-day trend. It also highlighted the potential for the index to fail to hold it's range highs while the breadth data pointed to some pockets of the market developing overbought and approaching overbought conditions. Further analysis of the candle structure for the first two days of the week shows the development of long upper tails at the top of the range. This points to short term selling pressure following an massive short term advanced.
Chart as of Thursday, 24 April at 12h47
PREVIOUS POST (MONDAY 21 APRIL): 12000 Points
The index is higher by 12,000 Points, with the move in line with the 'Oversold' reading, having closed in 'Strong' regime on Thursday. Scroll (further) down to read our original post.
As of Thursday's close (17 April), the Monthly (M), Weekly (W) and Daily (D) regimes were as follows:
By the end of the week saw further upside follow-though, with the index extending it's gains while the oversold conditions as of the close on Friday 04 April continued to unwind. We also saw the index rebound sharply off the channel support, as highlighted in the previous note (scroll down to view). As per the note coming into this past week, our nearest, next-best probability price action as per the price action model was to buy on a pullback. At Wednesday's highs, the index now traded 16% above the channel support and is 12000 points higher than the low seen on Monday 07 April. It should also be noted that the index is move in line with the oversold reading as per the price action model as well as strategy alerting traders to look for support at the prior swing lows.
Previous Post (Saturday 05 April at 14h37) : JSE Top 40 Index: Weekly Chart Analysis
JSE Top 40 Index Analysis:
Short Term (1 to 10 days): The short-term reading is Oversold. This suggests that the index has likely experienced a significant decline and may be due for a rebound or consolidation. However, being oversold alone doesn't guarantee an immediate reversal.
Medium Term (2 to 4 weeks): The medium-term reading is Weak. This implies that the index has been trending downwards over the past few weeks, indicating underlying selling pressure.
Long Term (5 to 8 weeks): The long-term reading is Neutral. This suggests that over a broader timeframe, the index hasn't established a clear upward or downward trend.
Overall Assessment:
Taking into account the weighted importance (short-term being the most significant), the JSE Top 40 Index exhibits deteriorating price action. While the oversold reading in the short term might offer a temporary bounce, the weakness in the medium term, coupled with the lack of a strong long-term trend, suggests caution. The recent price action is more aligned with the medium-term weakness than the potential for a short-term recovery.
Lester Davids
Analyst: Unum Capital
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