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Foretelling Friday: JSE Top 40 vs. South African Banks – Momentum Shifts Ahead?

  • Writer: Luke Holland
    Luke Holland
  • Oct 28, 2024
  • 2 min read

This week, the South African banking sector is showing signs of slowing momentum against the broader JSE Top 40 index. Despite a solid run, the equally weighted JSE Banks index has hit resistance within its multi-year trading channel, and its upward push appears to be losing strength. Adding to this, the index has stretched significantly above its 200-week simple moving average (SMA), suggesting that it may soon pull back toward this long-term trendline. This positioning indicates potential weakness for banks relative to the broader market.


ine chart comparing the JSE Banks Index (equally weighted) to the JSE Top 40 Index over several years. The chart shows the JSE Banks Index hitting resistance at the upper boundary of a multi-year trading channel, with annotations marking key resistance points. A 200-week simple moving average (SMA) line is visible below the index line, indicating the potential for mean reversion and a possible pullback in momentum.

JSE Banks (equally weighted) Relative to the JSE top 40 index. The chart is done by Lester Davids, Unum Capital Analyst.


Key Factors to Watch:


  • Technical Resistance: The JSE Banks index has reached a critical resistance level in its multi-year channel, which could serve as a ceiling and signal the end of the current upward trend.


  • Mean Reversion Risk: When an index extends well beyond its 200-week SMA, it often hints at a possible pullback, as it has strayed far from its long-term average. Banks may see a reversion toward this mean in the coming sessions.


  • Rand Strengthening: Adding pressure to the banks, the South African rand has strengthened in recent sessions. While a stronger rand benefits some sectors, it often compresses banks' profit margins, particularly in their export or foreign-denominated revenue streams, putting them at a relative disadvantage in the broader market.


What do you think? We'd love to hear your thoughts. Participate in our poll on our social media platforms.


  1. The banking sector will experience a pullback this week.

  2. The banking sector is resilient and will extend its upward run.

  3. The banking sector will stabilise at these levels before a decisive movement.


As we progress into next week, keep an eye on whether banks can sustain these levels or if we’ll see a rotation back into other sectors within the JSE Top 40. Stay ahead of the curve with Unum Trade for timely insights and refer to our disclaimer at https://unum.capital/research-disclaimer/.

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