Underneath The Surface: Here's What's Happening on the JSE

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

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If you are looking for a gentle rotation, this market isn’t it.

Between January 9 and January 13, the JSE underwent a violent structural shift. What began as a mixed board has rapidly bifurcated into a "barbell" market, where liquidity is fleeing the center and aggressively choosing sides. We have witnessed a 250% increase in short-term bearish signals in just two sessions, creating a "Red Wave" that has swept through SA Inc—specifically Banks, Insurers, and Retailers.

For the active trader, this extreme polarization fundamentally alters the Reward to Risk profile of the market.

The "safe" middle ground has become the most dangerous place to be. The current data suggests that the optimal Reward to Risk is now found only at the extremes: either aligning with the high-velocity breakout momentum in Precious Metals (Gold and Platinum), or stalking the capitulation in deeply oversold sectors like Paper & Pulp. Trying to nurse positions in the deteriorating "grey zone"—like Telecoms or Hospitals—offers little upside for the risk of further stagnation.

In this week’s report, we break down this divergence, identifying where the momentum is real, where the capitulation is nearing a math-based floor, and how to position yourself when the indices are telling two completely different stories.

This deep dive isolates specific structural shifts, velocity of moves, and hidden divergences in the JSE sectors.

I. Market Breadth & Sentiment Structure

1. The "Red Wave" Contagion (Short-Term Collapse) The most striking feature is the contagion speed in the short term. On Jan 9, only 2 sectors were "Weak" in the short term. By Jan 13, this jumped to 7 sectors. This 250% increase in bearish signals confirms a high-velocity liquidation event rather than a gentle rotation.

2. Extreme Polarization (The "Barbell" Effect) The market has hollowed out. Most sectors are now either "High Bullish" (Gold) or "High Bearish/Weak" (Banks, Retailers). The lack of "Neutral" readings suggests liquidity is fleeing the middle ground and is actively choosing sides—defensive longs or aggressive shorts.

3. "Oversold" Convergence Warning We are seeing a convergence of "Approaching Oversold" signals across different timeframes for multiple sectors (Tech, Banks, Insurers, Paper). When multiple heavyweights hit this signal simultaneously, it often precedes a violent snap-back rally or a "clearing trade" where weak hands are finally flushed out.

4. The Disappearance of "Strong" Signals On Jan 9, six sectors had a "Strong" short-term rating. By Jan 13, that number halved. The "Strong" designation is now an exclusive club (Gold, Platinum, Consumer Staples, Chemicals), making stock selection significantly harder than it was just four days ago.

5. Long-Term Trend Stubbornness Despite the short-term volatility, the "Long Term" column remains largely static. Most sectors (Miners, Insurers, Consumer Disc.) are still "Weak" or "Neutral." This implies the current moves are corrections within a downtrend rather than a trend reversal—the primary trend remains bearish for SA Inc.

II. Sector Specifics: The Winners (Defensive & Commodities)

6. Gold Miners: The Perfect Storm Gold Miners achieved the "Holy Grail" of technical signals on Jan 13: Green across the board (Bullish/Strong/Bullish). This triple-alignment indicates institutional accumulation. The shift from "Neutral" to "High Bullish" in just two sessions suggests aggressive chasing of the bid.

7. Platinum’s Resilience Platinum Miners held their ground better than almost anything else. While others collapsed, Platinum maintained "Strong" (Long Term) and "High Bullish" (Medium Term). This confirms it as a leader, likely driven by PGM basket price strength independent of general equity sentiment.

8. Consumer Staples: The Safe Harbor Staples defied the sell-off. While Discretionary stocks collapsed, Staples held "Neutral" on the Long/Medium term and remained "Strong" on the short term. This divergence clearly highlights investors hiding in defensive, non-cyclical names (food retailers vs. apparel).

9. Coal Miners: Losing Momentum Coal Miners showed a subtle but important degradation. They lost their "Strong" rating in the Medium Term (dropping to "Neutral") and lost the "High Bullish" rating in the Short Term. The energy trade is cooling off relative to precious metals.

10. Chemicals: The Volatility Hedge? Chemicals are behaving strangely. Despite a "High Bearish" long-term signal, they are consistently "Strong" in the short term. This might be idiosyncratic (specific company news within the sector) rather than a sector-wide theme, acting as a counter-correlation trade.

III. Sector Specifics: The Losers (Financials & Cyclicals)

11. Banks: The Momentum Crash The degradation in Banks is severe. Dropping from "Neutral" across the board (Jan 9) to "High Bearish Momentum" (Jan 13) represents a "volatility expansion" to the downside. This is often the signal that breaks the back of the broader Top 40 index.

12. Insurers Follow the Leader Insurers lagged Banks slightly but have now synchronized to the downside ("Weak" across all timeframes). The correlation between Banks and Insurers hitting lows together confirms this is a macro-driven exit from SA Financials (likely currency or bond yield related).

13. Retail (Consumer Disc.) Capitulation Consumer Discretionary is the weakest link. It is the only sector with "High Bearish Momentum" across two timeframes (Long and Medium). The short-term drop to "Weak" confirms there are no buyers stepping in even at these lower levels.

14. Luxury Goods: The False Dawn On Jan 9, Luxury Goods looked like they were stabilizing (Neutral). That failed completely by Jan 13 (Weak). This "bull trap" likely caught traders who thought the luxury sector (typically Rand-hedge sensitive) would protect them.

15. Telecoms: A Quiet Death Telecoms didn't crash; they just faded. They went from "Strong" (Medium/Short) on Jan 9 to "Neutral" and "Weak" on Jan 13. This low-volatility bleed is dangerous because it traps passive holders who don't see a panic signal until it's too late.

IV. Factor & Structural Insights

16. The "SA Inc" vs. "Rand Hedge" Split A clear fracture has opened up. "SA Inc" sectors (Banks, Retail, Insurers, Hospitals, Telecoms) are all red/weak. "Rand Hedge" / Global sectors (Gold, Platinum) are green/strong. This data suggests a specific macro trade: Short SA / Long Commodities.

17. Paper & Pulp: The Contrarian Setup Paper & Pulp is flashing the only pure "Oversold" signal (Long Term) on the entire board. This is rare. While momentum is bearish, this sector is mathematically the most stretched to the downside, making it the #1 candidate for a "dead cat bounce."

18. Hospitals: Stuck in Limbo Hospitals are irrelevant right now. They shifted from "Strong" short-term to "Neutral." They are neither a crash risk nor a momentum leader. In a polarized market, capital ignores these "grey" sectors, leading to low volume and chopping range-bound action.

19. Technology: The Momentum Trap Tech is showing "High Bearish Momentum" in the medium term. Often traders buy tech dips early, but this signal suggests the selling has velocity. The "Approaching Oversold" tag warns that while a bounce is due, catching the falling knife is dangerous.

20. General Miners Divergence The gap between "Miners" (Neutral/Weak) and "Gold/Platinum" (Strong/Bullish) is critical. You cannot just "buy resources." You must be specific. The diversified miners are dragging, likely due to weakness in iron ore or base metals, masking the strength in precious metals.

Lester Davids

Senior Investment Analyst: Unum Capital