JSE Sector Rotation Report: Trend & Momentum Analysis

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

End of day: 31 December 2025

Executive Summary

The current market cycle exhibits a distinct narrowness in leadership, heavily skewed towards the Resource complex. Platinum Miners stand alone as the undisputed market leaders, showing strength across all timeframes. Conversely, a significant portion of the "SA Inc" stocks (Financials, Retailers, Hospitals) are currently languishing in the Lagging quadrant, dragging on the broader index. The most notable rotational opportunity appears to be in General Miners and Telecoms, which are showing early signs of shifting momentum.

1. The Leading Quadrant (Bullish)

High Relative Strength / High Momentum

Sectors in this quadrant are dominating the market. They are outperforming the benchmark on a trend basis and accelerating that performance in the short term.

• Platinum Miners vs. Top 40

  • Technical Status: Strong / Strong / Strong.

  • Analysis: This sector is the current "Alpha Engine" of the JSE. It is not merely enjoying a short-term pop; the alignment of strength across long, medium, and short timeframes suggests a robust, sustained uptrend. Investors are aggressively allocating capital here, and pullbacks are likely being bought quickly.

  • Outlook: Continue to favor long exposure, trailing stops to protect gains.

2. The Weakening Quadrant (Correction/Consolidation)

High Relative Strength / Low Momentum

Sectors here remain in a long-term uptrend but are experiencing a temporary loss of momentum. This is often a zone of profit-taking or consolidation.

• Gold Miners vs. Top 40

  • Technical Status: High Bullish Momentum (Long-term) vs. Weak (Short-term).

  • Analysis: While the structural bull market for Gold Miners remains intact, the sector is currently "taking a breather." The flip to weak short-term momentum suggests price action has run too far, too fast, and is now reverting to the mean.

  • Outlook: Watch for stabilization. If the long-term trend holds, this "Weakening" phase may present a "dip-buying" opportunity once short-term momentum neutralizes or turns upward again.

3. The Improving Quadrant (Turnaround Candidates)

Low Relative Strength / High Momentum

These sectors have been downtrodden but are seeing a sharp influx of short-term buying pressure. This is the "Rotation Zone" where value investors and aggressive traders look for trend reversals.

• General Miners vs. Top 40

  • Technical Status: Weak (Long-term) vs. Strong (Short-term).

  • Analysis: A classic turnaround setup. While the historical trend is negative, recent price action indicates a bottoming process. The surge in short-term momentum suggests the "smart money" may be rotating into this beaten-down sector expecting a reversal.

• Telecoms vs. Top 40

  • Technical Status: Neutral (Long-term) vs. Strong (Short-term).

  • Analysis: Telecoms are actively climbing the curve. Moving from a Neutral long-term stance to Strong short-term momentum implies they are breaking out of a holding pattern and attempting to enter the Leading quadrant.

4. The Lagging Quadrant (Bearish)

Low Relative Strength / Low Momentum

Sectors in this quadrant are underperforming the market on both trend and momentum. They are the primary source of drag on the index.

• Technology (High Bearish Trend)

• Consumer Discretionary (High Bearish Trend)

• Chemicals (High Bearish Trend)

• Paper & Pulp (Oversold condition)

• Luxury Goods

• Hospitals

• Coal Miners

• Insurers

Cohort Analysis: This is the most crowded quadrant, containing a diverse mix of sectors.

1. Deep Lag: Technology, Chemicals, and Discretionary are showing "High Bearish" signals, indicating active distribution (selling).

2. Stabilization vs. Lag: Sectors like Hospitals, Insurers, and Coal display "Neutral" readings on shorter timeframes. This distinction is vital: they are not necessarily crashing, but they lack the catalytic energy to move right on the graph. They are "dead money" until momentum improves.

5. The Center (Benchmark Huggers)

Neutral Trends / Neutral Momentum

These sectors are performing in lockstep with the Top 40. They provide neither alpha (excess returns) nor significant drag.

• Banks vs. Top 40

• Consumer Staples vs. Top 40

  • Analysis: These sectors represent the average market temperature. The fact that Banks are neutral while Insurers are lagging suggests a lack of appetite for financial risk, but not an outright exodus from the banking system.

Strategic Conclusion

The Flow of Funds: Money is clearly rotating within the Resources complex. While Gold miners rest (Weakening), capital is flowing aggressively into Platinum (Leading) and bottom-fishing in General Miners (Improving).

The Risk: The market breadth is concerning. With the vast majority of Industrial and Financial sectors (Retail, Tech, Insurers, Hospitals) stuck in the Lagging quadrant, the JSE is currently flying on one engine (Resources). If the Resources trade falters, the broader index lacks support from "SA Inc" sectors to catch the fall.

Actionable Watchlist:

1. Long: Platinum Miners (Trend Following).

2. Watch: General Miners (Reversal setup).

3. Avoid/Short: Technology and Consumer Discretionary (until momentum shifts).

Lester Davids

Senior Investment Analyst: Unum Capital