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JSE Sector Rotation Report

  • Writer: Lester Davids
    Lester Davids
  • 1 day ago
  • 3 min read

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

Trade Local & Global Financial Markets with Unum Capital.

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Compared to our last report, this past Monday (05-January), these are the sector regime and momentum changes on a relative basis (compared to the JSE Top 40 Index), as of yesterday's close (Thursday 08 January).



1. Executive Summary: The Verdict

The Great Rotation: Resources Cool, Financials Awake A significant sectoral rotation has occurred over the last 72 hours. The aggressive buying in Resources (Diversified and Platinum Miners) has sharply decelerated, with short-term momentum dropping back to "Neutral" as traders book profits.

Capital is rotating aggressively into Financials and Defensives. Banks have surged, breaking out of their slumber to register "Strong" signals across both Medium and Short terms. Simultaneously, Telecoms has accelerated into "High Bullish Momentum," becoming the hottest short-term trade on the board.

Coal Miners have also confirmed their breakout, upgrading to a "Double Strong" (Medium & Short Term) profile, validating the tactical buy signal issued earlier this week.


2. Strategic Asset Allocation View

Suggested portfolio weighting relative to the JSE Top 40 Index based on current technical posture.

🟢 Overweight (Accumulate / Momentum)

  • Banks: The new leadership pillar. A major shift from "Neutral" to "Double Strong."

  • Telecoms: The most aggressive momentum play ("High Bullish / Appr. OB").

  • Coal Miners: Confirmed trend. Now "Strong" on both Medium and Short horizons.

🟡 Neutral (Hold / Profit Take)

  • Platinum & Diversified Miners: Momentum has vented. Short Term signals have dropped to "Neutral." Hold core positions but cease aggressive buying.

  • Consumer Staples: Improving. Short Term signal has shifted to "Strong," making this a solid defensive hold.

  • Gold Miners: Remains in structural consolidation.

🔴 Underweight (Avoid)

  • Consumer Discretionary: Risks remain elevated. Long Term sentiment is "High Bearish."

  • Paper & Pulp: Deteriorating. Short Term momentum has slipped to "Weak."

  • Chemicals: No signs of a bottom.


3. Detailed Sector Analysis by Tier

Tier 1: The New Momentum Leaders

  • Sector: Telecoms

  • Status: Aggressive Trend

  • Technical Profile:

    • Medium Term: Strong

    • Short Term: High Bullish Momentum / Approaching Overbought

  • Analysis: Telecoms has taken the baton from Miners. It is currently the only sector with a "High Bullish" short-term reading. This is a breakout that demands exposure, though trailing stops should be tightened as it nears overbought territory.


Tier 2: The Awakened Giants (Financials)

  • Sector: Banks

  • Status: High Conviction Breakout

  • Technical Profile:

    • Medium Term: Strong

    • Short Term: Strong

  • Analysis: After weeks of "Neutral" stagnation, Banks have fired a powerful bullish signal. The synchronization of "Strong" readings on both MT and ST timeframes typically precedes a sustained multi-week rally.


Tier 3: The Confirmed Turnaround

  • Sector: Coal Miners

  • Status: Tactical Long

  • Technical Profile:

    • Medium Term: Strong

    • Short Term: Strong

  • Analysis: The tactical bet has paid off. Coal has upgraded its Medium Term view to "Strong," aligning with the Short Term. This is no longer just a bounce; it is a trend.


Tier 4: The Cooling Off Phase (Resources)

  • Sectors: Platinum Miners, Diversified Miners

  • Status: Consolidation

  • Technical Profile:

    • Short Term: Neutral

  • Analysis: The "froth" has been blown off. Both sectors have seen their Short Term ratings drop to "Neutral." This is healthy for the long-term structure but indicates that the easy money has been made for now.


Tier 5: The Defensive Shield

  • Sector: Consumer Staples

  • Status: Safety Play

  • Technical Profile:

    • Short Term: Strong

  • Analysis: Quietly effective. While the Long/Medium terms remain Neutral, the Short Term shift to "Strong" suggests defensive rotation is active.


Tier 6: The Laggards

  • Sectors: Technology, Luxury Goods, Consumer Discretionary

  • Status: Bottom Fishing (High Risk)

  • Technical Profile:

    • Short Term: Neutral / Weak

  • Analysis: Technology and Luxury Goods have seen their Short Term signals stabilize to "Neutral," suggesting the selling pressure has paused. However, without a "Strong" impulse, these remain dead money.


Lester Davids

Senior Investment Analyst: Unum Capital

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