Bulls still ram­pant, bears sub­dued

Finweek English Edition - - MONEY - % ABOVE 200-DAY EXPO MA

If we look at the ac­com­pa­ny­ing ta­bles, we are left in no doubt that a ro­bust bull mar­ket is still be­ing ex­pe­ri­enced on the JSE. Weekly closing prices of al­most 60% of the top 100 shares on the JSE lie 20% or more above their 200-day ex­po­nen­tial mov­ing av­er­ages (MA). On the other hand, only one fifth of them lie 10% or more be­low their 200-day mov­ing av­er­ages.

The bulls are ob­vi­ously dom­i­nat­ing the JSE and analy­ses are ap­pear­ing reg­u­larly of when the cur­rent long-term bull mar­ket, which be­gan in 2009, is likely to end. A thread that con­stantly runs through the analy­ses is that we’re

STRONG­EST SHARES*

131.1 125.1 96.6 93.4 88.5 78 74.1 66.6 66.3 63.7 62.7 62.13 61.5 60.9 58.1 55.2 51.6 50.2 49.6 49.6 49 48.4 merely experiencing an over­flow of the enor­mous liq­uid­ity, which was f irst pumped into the world econ­omy by the US and cur­rently by Europe and Ja­pan, in or­der to pre­vent a re­ces­sion and de­fla­tion.

An­other a s p e c t t hat ’ s b e i ng em­pha­sised is that the high val­u­a­tions in our mar­ket are not sup­ported by eco­nomic growth. In fact, spec­u­la­tion is that the mar­ket could be fac­ing some ad­ver­sity as South Africa could be down­graded to junk sta­tus should gov­ern­ment and t rade unions not ad­e­quately heed the call of the min­is­ter of fi­nance for fi­nan­cial dis­ci­pline.

Capitec is still the strong­est share on the JSE mea­sured in terms of its per­cent­age above its 200-day ex­po­nen­tial mov­ing av­er­age. How un­be­liev­ingly well it has re­warded its share­hold­ers is ev­i­dent from the fact that it has grown by al­most 4 400% (ex­clud­ing div­i­dends) over the past 10 years, with the big­gest in­crease of close on 150% since Septem­ber last year. And Capitec has taken its ma­jor share­holder, PSG Group*, in tow along with it. PSG’s share price in­creased over the past 10 years by about 2 900% (ex­clud­ing div­i­dends).

Telkom re­cently jumped from 10th place on the list of the strong­est shares to third place. This is due to the sale (at last!) of three of its busi­nesses to, among oth­ers, Bar­loworld and Bid­vest. Snap­ping at its heels is Pi­o­neer Foods, an­other com­pany that’s an im­por­tant player in the PSG sta­ble. Stein­hoff ’s mo­men­tum has im­proved re­mark­ably, from 13th place to eighth.

The weak­est shares still con­sist of min­ing and build­ing and con­struc­tion shares that are be­ing clawed by the bear, with As­sore, Aveng, Kumba, Mur­ray & Roberts, ArcelorMit­tal and Al­tron at the bot­tom of the pile.

Of the shares that are experiencing suf­fi­cient buy­ing pres­sure to thrust their heads just above the 200-day mark, Tru­worths and JD Group, in par­tic­u­lar, look promis­ing. The lat­ter’s chart has formed a saucer, which is re­garded as pos­i­tive by tech­ni­cal an­a­lysts. Stein­hoff con­tin­ues to buy this share. It cur­rently owns 87.12% of JD Group and an of­fer to mi­nori­ties seems pos­si­ble. At BHP Bil­li­ton there are signs of some buy­ing pres­sure be­ing ex­erted.

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