top of page

Market Breadth: Narrowing Bullishness

  • Writer: Lester Davids
    Lester Davids
  • 3 days ago
  • 2 min read

Research Notes January 2026 > https://www.unum.capital/post/rjan2026

Trade Local & Global Financial Markets with Unum Capital.

To get started, email tradingdesk@unum.co.za


1. Market Breadth Overview: "Narrowing Bullishness"

The headline indices are pushing higher, but the participation engine is sputtering. While the long-term trends remain robust, short-term momentum is increasingly concentrated in the Resources sector.


2. Factor Analysis

Which investment styles are working right now?


A. Momentum Factor (Winner: Resources)

The Momentum factor is actively chasing performance in the Resources sector, specifically Precious Metals (PGMs) and Diversified Miners.

  • The "Thrust" Cluster: AGL, ANG, GFI, IMP, SSW, S32, NPH, THA.

  • Observation: These stocks are trading significantly above their 21-day EMAs. For example, Impala Platinum (IMP) is trading at 30,000c, nearly 15% above its 21-day EMA of 26,045c. This degree of extension confirms the "Euphoria" readings from the RSI table.

  • Risk: The gap between price and the 21-day EMA is stretching (rubber band effect), increasing the probability of a mean-reversion snapback.


B. Quality/Defensive Factor (Laggard)

Defensive "Quality" stocks are being liquidated to fund the rotation into Miners.

  • The "Bleeding" Cluster: British American Tobacco (BTI), Mondi (MNP), Outsurance (OUT), Spar (SPP).

  • Observation: BTI is trading below its 21-day EMA (92,578c) at 90,201c. Mondi is down -3.96% on the week. Money is visibly exiting these stable cash-flow generators to chase beta.


C. Value Factor (The "Falling Knives")

Deep Value is struggling to find a floor.

  • The "Avoid" Cluster: Pick n Pay (PIK), Mr Price (MRP).

  • Observation: MRP is trading at 16,938c, well below its 200-day SMA of 21,320c (-20% discount to trend). This confirms it is in a structural bear market, not just a pullback.


3. Sector Rotation: The Great Migration

Capital is flowing violently from "SA Inc" (Banks/Retail) into "Global Cyclicals" (Miners).


Leading: Resources & Energy (Inflow)

  • Status: Strong Accumulation.

  • Key Data: Glencore (GLN) is up +12.86% this week. Sibanye (SSW) is up +12.83%.

  • Breadth: Almost every major miner is trading above its 21-day and 200-day averages. This is a synchronized sector assault.


Weakening: Financials (Outflow/Profit Taking)

  • Status: Distribution.

  • Key Data: Standard Bank (SBK) is down -1.11% and FirstRand (FSR) is flat (+0.82%).

  • Breadth: While they remain above their 200-day SMAs (Long-term Bullish), many are slipping toward or below their 21-day EMAs. Sanlam (SLM) and Absa (ABG) are holding, but the momentum has stalled.


Lagging: Retailers (Capitulation)

  • Status: Bearish.

  • Key Data: Mr Price (MRP) down -4.25%, Foschini (TFG) struggling.

  • Breadth: Multiple names (MRP, SPP, PIK) are trading below their 200-day SMAs, signaling a broken long-term trend.


4. Strategic Implication

The market internals suggest a "Rotation Risk" rather than a crash risk. The index is being held up by the massive weight of the Resource giants, masking the weakness in the broader market.

  • For Traders: The "easy" momentum trade is in Resources, but the entry point is high risk (extended from EMAs). Look for Flag/Pennant formations on the hourly charts of AGL or ANG to enter, rather than chasing the daily closes.

  • For Investors: The "Quality" pullbacks in names like Capitec (CPI) and Bidvest (BVT)—which are cooling off to their 21-day EMAs but remain structurally sound—offer the best risk/reward entries for medium-term holds.


Lester Davids

Senior Investment Analyst: Unum Capital

Comments

bottom of page