JSE Sector Rotation Report

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

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1. Executive Summary

Key Takeaway: Miners & Telecoms Lead 🟢; Consumer Cyclicals Remain Oversold 🔴

The first trading week of 2026 presents a distinct divergence on the JSE. The General Miners sector has exploded into "High Bullish Momentum," joining Platinum and Coal to cement Resources as the dominant market theme 🟢. Interestingly, Telecoms have rotated aggressively into "Strong" territory, offering a defensive growth alternative.

Conversely, the Consumer theme remains under severe pressure. Consumer Discretionary and Paper & Pulp are flashing "Oversold" on the long-term timeframe, while Luxury Goods remains trapped in a persistent weak trend 🔴. "SA Inc" banks remain completely flat 🟡, signaling indecision in the local financial complex.

2. Visual Relative Rotation Graph (RRG) Analysis

This section analyzes sector rotation based on Relative Strength (RS) and Relative Momentum (RM).

2.1. Leading Quadrant 🟢 Strong Relative Strength & Momentum

• Miners (General) 🟢: The standout performer. Surged to "High Bullish Momentum" in the short term and remains "Strong" in the medium term.

• Platinum Miners 🟢: Strong relative strength persists, though long-term metrics suggest it is approaching overbought levels.

• Coal Miners 🟢: Maintains its position as a market leader with "Strong" short-term momentum.

• Telecoms 🟢: A significant rotation upward. This sector has moved firmly into "Strong" territory on the short timeframe, diverging from other domestics.

2.2. Weakening Quadrant 🟡 Positive Relative Strength, but Momentum Fading

• Gold Miners 🟡: While the long-term trend remains bullish, short and medium-term momentum has cooled to "Neutral," suggesting a consolidation phase.

• Banks 🟡: The definition of indecision. Neutral across all three timeframes (ST, MT, LT).

• Hospitals 🟡: Tracking the banks with a flat/neutral profile.

2.3. Improving Quadrant 🔵 Negative Relative Strength, but Momentum Improving

• Chemicals 🔵: While the long-term trend is bearish, the short-term rating has stabilized to "Neutral," hinting at a potential base formation.

• Paper & Pulp 🔵: Long-term oversold conditions are severe, but short-term momentum has stabilized to "Neutral." Watch for a mean-reversion bounce.

2.4. Lagging Quadrant 🔴 Negative Relative Strength & Momentum

• Technology 🔴: Remains under pressure with "High Bearish Momentum" in the medium term.

• Luxury Goods 🔴: No signs of a turnaround; rated "Weak" across all timeframes.

• Insurers 🔴: Underperforming their banking counterparts, slipping to "Weak" in the short term.

• Consumer Discretionary 🔴: Despite being oversold long-term, short-term momentum remains "Weak."

3. Mean Reversion Hunter (Quarterly Context)

This section identifies sectors at statistical extremes on the Quarterly (Long-Term) timeframe, increasing the probability of a "snap-back" or mean reversion event.

3.1. Deep Value Watch (Bounce Potential) 🔵 Sectors stretched to the DOWNSIDE

• Consumer Discretionary:

  • Status: LT: Oversold | MT: High Bearish

  • Outlook: Deeply oversold on the long timeframe. However, the medium-term "High Bearish" signal suggests catching a falling knife requires patience.

• Paper & Pulp:

  • Status: LT: Oversold | MT: Weak

  • Outlook: Statistical extremes have been reached. With short-term momentum neutralizing, a relief rally is becoming probable.

• Chemicals:

  • Status: LT: High Bearish / Approaching Oversold

  • Outlook: Approaching capitulation levels.

3.2. Overextended Watch (Pullback Risk) 🟠 Sectors stretched to the UPSIDE

• Gold Miners & Platinum Miners:

  • Status: LT: High Bullish Momentum / Approaching Overbought

  • Outlook: Both precious metal sub-sectors are flashing "Approaching Overbought" on the long-term heatmap. While the trends are strong, the risk-to-reward ratio for new long-term entries is diminishing.

4. Fundamental Drivers: The "Why" Behind the Flows

4.1. The Resource Super-Cycle 🟢 Sectors: Miners, Platinum, Coal General Miners have accelerated, likely driven by industrial metal demand or currency weakness. The synchronization of Platinum, Coal, and General Miners suggests a broad-based "risk-on" trade within the commodity complex.

4.2. Defensive Rotation 🟢 Sectors: Telecoms The surge in Telecoms to "Strong" suggests investors are seeking yield and defensive qualities outside of the traditional Banks/Insurers trade, perhaps hedging against local economic stagnation.

4.3. Consumer Fatigue 🔴 Sectors: Discretionary, Luxury, Paper The "Oversold" signal in Consumer Discretionary and Paper & Pulp highlights deep pessimism regarding the consumer wallet. The lack of a bounce in Luxury Goods confirms that high-end spending remains constrained.

Lester Davids

Senior Investment Analyst: Unum Capital