Market Overview

15 November 2020 By PDSNET

Now that the uncertainty of the US election is essentially over, it is perhaps a good time to step back and consider where we are and what is likely to happen next.

The S&P500 index, which is an excellent benchmark for trends in the international markets, appears to be breaking to a new record high – above the resistance at 3580. Consider the chart:

S&P500 Index: January 2020 - to date (13 November 2020). Chart by ShareFriend Pro.

You can see here the downward spike caused by the pandemic which was followed by a rapid recovery to a new all-time record high at 3580. Notably, the downward spike caused by COVID-19 was not sufficient to cause the 200-day moving average to turn down significantly – a clear indication that the long-term bull trend was still intact.

The uncertainty around the US election and the second wave of COVID-19 in some first world countries has temporarily arrested the upward momentum and held the market in a sideways pattern between support at 3225 and resistance at 3580 since September 2020. On Friday (13-11-20) the market closed just above that resistance level and now looks set to begin a new upward trend. Obviously, investors are encouraged by the prospect of the second $2,4 trillion stimulatory package and the apparent imminent availability of a vaccine.

Our view has always been that the COVID-19 downward spike in markets was a technical aberration resulting from a “black swan” event. That event temporarily interrupted world economic growth, but was and remains completely unrelated to the underlying growth trends in the world economy. Now that investors are becoming confident that the pandemic is almost behind us and the uncertainties surrounding the US election are fading, they are driving markets upwards to new highs in anticipation of further stimulus.

The impact of this on the JSE is obvious. International investors are rapidly shifting from a mood of “risk-off” to “risk-on” – which is making our high-yielding government bonds very attractive. This, in turn, is driving the undervalued rand upwards against the US dollar as overseas funds pour into the country. Consider the chart:

South African rand/US dollar: 23 Mar 2020 - 11 November 2020. Chart by Sharefriend Pro

We have long believed that the rand was materially undervalued against hard currencies and that continued strength was likely. We see the rand continuing to gain ground against first world currencies. This is combining with the weakening oil price should portend a significant drop in petrol prices in South Africa in the coming months.

As a private investor you should be aware that time is running out to buy those high-quality blue-chip shares which are still trading at significant discounts. The strength of the rand will make the traditional rand-hedge shares less attractive and companies with a locally based income more attractive. The expected drop in fuel prices will add to other local stimulatory measures to help the recovery of the economy. It will also increase the downward pressure on the inflation rate making further monetary policy options possible.

Our view remains that the South African economy will recover more rapidly from the pandemic than most economists are expecting.


All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

Share this article:



Truworths (TRU) is a retailer of fashionware in South Africa and the UK. As such its business has been damaged by the impact of Brexit in the UK and the recessionary conditions in the South African economy. Both countries have then been impacted by lockdowns which prevented in-store sales for a period of time, beginning in late March 2020. The second wave of the pandemic has also been a factor. In the UK,

The Coming Blow-off

At the start of 2021, it is as well to stand back and consider the context of where world markets are as they slavishly follow Wall Street up to new record highs.  Consider the 12-year chart of the S&P500:

The chart shows that the great bull market which began in March 2009 is on-going. It is moving within a clearly defined channel.

Window Dressing

We all know that our market, the JSE, is dominated by the big institutions – the pension funds, unit trusts, insurance companies and a scattering of large fund managers. These institutions together account for at least 90% of the trades on the JSE by value. We private investors make up the rest.
Big institutions have huge holdings of mostly blue-chip or

The Rand Bull

For some years now we have believed that the rand was underpriced in relation to the currencies of first world countries, especially the US dollar. We have also said that the rand, as one of the most heavily traded emerging market currencies, is a barometer of the international investment community’s perception of risk in the world economy. When investors

Start an Investment Club

A few years ago, we developed software to manage an in-house investment club for our staff members. We now offer it to any member of the public who wants to set up an investment club, free of charge. Using the daily closing prices from the JSE, this software is designed to keep track of the investments of a group of people who have decided to work together on investing directly

The Confidential Report - December 2020

We have come to the end of a tumultuous and unique year marked by the “black swan” event of COVID-19, various Trump excesses and, finally, his vanquishing. The long-term progress of the S&P500 as outlined in “our Background Approach” on our web site remains in tact. In that scenario, the world economy is moving into a strong boom phase stimulated by unprecedented


Property shares on the JSE have had a torrid time over the last few years. It began with the melt-down which resulted from the Resilient crisis, now substantially behind us, and continued with the eventual failure of the Edcon Group and the effects of the COVID-19 lockdown. These events have combined with a generally negative economy to reduce the value of property shares significantly.

Insider Trading

The JSE has just witnessed one of the most blatant examples of insider trading in many decades. It involved a small real estate investment trust (REIT) called Texton. This company owns 53 properties, 56% of which are in South Africa and the balance in the UK. After it listed on the JSE in August 2011, the share rose to a high of 1235c on 6th March 2015 before beginning a steady

The Confidential Report - November 2020

At the close of trade on Friday (30-10-20), the S&P500 index was down 7,5% from its cycle high of 3534 made on the 12th October 2020 – and this puts the market on a knife-edge. Consider the chart:

The critical level from a technical perspective is the previous cycle low of