JSE Top 40 Index: Short Term Cycle

Research Notes For 19 to 24 May > https://www.unum.capital/post/r1924may

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The strong upward trend over the past 5 weeks has pushed the index to an all-time high with a +21% gain over the 5-week period. As we previous noted, the candle structure and breadth has been reflective of early distribution (index level and selected counters) which should caution traders against aggressive buying into multi-week highs. At current levels the reward-to-risk on the buying long side is less appealing that what was on offer in previous weeks (specifically 07 - 09 April). As you will have seen on the website, the price action model reading highlighted a high bullish momentum / approaching overbought technical regime while the price action probability over the short term (1 to 10 days) reflected the potential for the index to fails to hold it's highs. On Thursday we saw some of this minor weakness emerge while Friday saw a strong close.

Chart as of the close on Friday, 16 May.

Lester Davids

Senior Investment Analyst: Unum Capital