In our prior articles, "this is how unhealthy our stock market is" and "A major leading indicator for the JSE just tanked" we introduced various indicators that have an impact on the JSE future performance
More recently, the ABSA Purchasing Managers Index (PMI) print for September was released, which posted another disappointing month in a row.
The ABSA PMI and the JSE 52-week % change move in tandem as shown below. It’s not an exact correlation but when one of these diverge to the downside, the other normally follows suit.
Here is the ABSA PMI turned into a summation index to give a view on how it moved in relation to the JSE. The trend is much more discernible now, one-way traffic downwards. In fact, the PMI summation is now at its lowest since the financial crises of 2008.
The ABSA PMI peaked around the same time as all our other health metrics, which have now been updated below to include September data:
We need to see that black average line bottoming out. Then the government can say their new policies are starting to pay off and many more opportunities will start opening up for investors on the JSE. If you would like to receive the next few updates to this chart, fill in the form below and tick the second Analytics topic.
In the short-term however the JSE Index is oversold after a greater than 10% correction and likely to post some gains - probably from the large-caps again. Apart from intelligent stock picking (requiring hard work and a good dose of luck or try our managed portfolios) and market timing during extreme oversold periods such as more recently, there are other ways to make money during local participation bear markets such as expanding your offshore exposure, investing in high yielding (+9% p.a) income funds etc.
To see this and other techniques of managing risk on the JSE, come to our national training sessions. You can book here.
Dwaine van Vuuren
RecessionAlert, Sharenet Analytics
Dwaine van Vuuren is a full-time trader, global investor and stock-market researcher. His passion for numbers and keen research & analytic ability has helped grow RecessionALERT.com (US based) and PowerStocks Research (now Sharenet Analytics) into companies used by hundreds of hedge funds, brokerage firms, financial advisers and private investors around the world. An enthusiastic educator, he will have you trading and investing with confidence & discipline.