Breadth: Interpretation of Market Conditions

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To help interpret underlying market conditions, we compare the market breadth readings from the end of Friday, 02 May 2025, to the end of Monday, 12 May 2025, for the JSE Mid & Large Caps:

End of Day: Friday 02 May 2025

The readings indicate a market leaning towards bullish sentiment. A significant number of constituents (23) were in the 'High Bullish Momentum / Approaching Overbought' category, with another 9 in 'Overbought'. Only 11 constituents were classified as 'Weak', and none were in the 'High Bearish Momentum / Approaching Oversold' or 'Oversold' categories. This distribution suggests a market with upward momentum, potentially nearing overbought conditions.

End of Day: Monday 12 May 2025

The readings show a noticeable shift. The number of constituents in the 'Overbought' category decreased significantly to 1, and those in 'High Bullish Momentum / Approaching Overbought' also decreased to 17. Conversely, the 'Strong' category saw a substantial increase to 43 constituents. The 'Weak' category remained similar with 10 constituents, while the 'High Bearish Momentum / Approaching Oversold' category appeared with 2 constituents, and none in 'Oversold'.

Interpretation

Over the period, there has been a reduction in the number of constituents exhibiting overbought or near-overbought conditions. The increase in the 'Strong' category suggests that while bullish sentiment remains prevalent, it has moderated somewhat. The emergence of a few constituents in the 'High Bearish Momentum / Approaching Oversold' category could be an early indication of some weakening.

Overall, the shift from the readings on May 2nd to those on May 12th suggests a cooling of the previously strong upward momentum. The current distribution, with the majority of constituents in the 'Strong' and 'Neutral' categories, does not strongly point towards an immediate near-term buying or selling opportunity based solely on this breadth analysis. The decrease in overbought readings might alleviate some concerns about an immediate selling opportunity, but the lack of a significant concentration towards oversold does not yet suggest a clear near-term buying opportunity.

The following slides (13 to 15 of 54) were featured in the report 'The Sum of the Charts', published Sunday 11 May for Monday, 12 May 2025.

Full Report: https://www.unum.capital/post/sotc1205

Lester Davids

Senior Investment Analyst: Unum Capital