ARTICLES

S&P500 Market Action

On the 20^th November 2023, we tweeted that the S&P500 index, after its sharp rise of the previous sixteen trading days, would probably experience some sort of correction. That correction did, in fact, materialise, but the strength of the upward trend and the bullish sentiment present in the market reduced it substantially and it has turned out to be more a period of sideways rather than downward movement.

It is always important to watch the action of the market closely to ascertain the strength or weakness of investor sentiment. The presence of break-away gaps is a sure sign that investor sentiment is very strongly bullish. The flattening of a technical correction into a period of sideways movement is a further indication of bullishness. Consider the chart:

This shows the progress of the S&P since the cycle high at 4589 made on 31^st July 2023. The 10,2% correction took the index down to a low of 4117 on 27^th October 2023 and then there was a strong recovery with at least three break-away gaps.

The previous cycle high then became a level of resistance – and, as we pointed out in our tweet of 20^th November, the market was at that time overdue for some sort of correction. The “correction” of the next thirteen trading days has been very muted – the S&P has hardly fallen at all - showing how dominant bullish sentiment is currently.

On 4^th December we tweeted that, despite the expected correction, we remained bullish and that we expected the index to break to a new all-time record high, possibly over the festive season, in a Santa Clause rally.

On Friday the 8^th of December the index broke up through the resistance at 4589 closing above the previous cycle high and is now just 4% below the all-time record high of 4796.56 made on 3^rd January 2022.

The trigger for the upside break was the US jobs number which came in better-than-expected at 199 000 with the unemployment rate dropping back to 3,7%. These positive numbers were sufficient to allay any fears of an impending recession while, at the same time, not dislodging the general perception that interest rates in America have peaked. Investors are now expecting rates to begin falling from about May 2024, slightly later than before.

As usual, investor sentiment in the US is teetering on a knife-edge. Positive economic news always tends to cause fears of further interest rate hikes, but at the same time it does show that the economy is doing well and that the profits of S&P500 companies will continue to increase.

What is interesting is that, while the S&P500 has been moving sideways, the JSE Overall index has corrected quite sharply, losing almost 3% in the last few days. This is in keeping with its status as an emerging market index. It always tends to be more volatile than the S&P moving further and often faster, both on the upside and the downside.

As the S&P moves above the current resistance at 4589, and especially if it breaks to a new all-time record high above 4796, we can expect the JSE to follow suit – but to go further and faster.

DISCLAIMER

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.

PDSNET ARTICLES

Smart Local Investors

The last two months have been wild on the markets – mainly because of Trump’s ill-advised, on-again, off-again tariff policies. The issue now is:

Will this morph into a full-blown bear trend? Or is this correction almost over?

From his election victory on the 6^th of November 2024,

Jerome Powell

The Federal Reserve Bank (“the Fed”) is completely outside the control of the President and Executive Branch of the US government. The chairman of the Fed is appointed for a renewable 4-year term by the President. The President cannot remove the Chair without cause. The current chairman, Jerome Powell was appointed by Trump during his first term as President and reappointed by

Uncertainty Soars

Investors are by their very nature risk takers, but they are always trying to reduce the risk which they have to take to a minimum. Donald Trump, with his threat of an international trade war and his on-again, off-again tariffs has significantly increased the level of risk in markets across the world. This can be seen in the extraordinary volatility in the S&P500

Liberation Day

Trump has done the unthinkable. He has deliberately engineered the collapse of the US and world stock markets in the nonsensical belief that somehow an international trade war will make Americans richer. Nothing could be further from the truth. His actions have taken the S&P down from its all-time record high of 6144.15 on 19^th February 2025 to Friday’s

The Creation of Money

The money supply of a country is a symbol of the goods and services of that country. Obviously, if the size of the money supply is increased more rapidly than the real growth of its economy, then you have more money chasing the same goods and services, resulting in rising prices. Since, over the long term, the only organisation that can create money is the government,

V-Bottom is likely

The 10% collapse of Wall Street, which is a direct result of Trump’s random policy of on-again, off-again tariffs, is very similar to what happened to Wall Street in February/March 2020 when investors tried desperately to accurately discount the impact of the COVID-19 pandemic.

Normally, corrections in the market

The Trump Correction

It is relatively unusual for the activities of American presidents or what they say to have an impact on the New York Stock Exchange, especially during their first 100 days in office. Trump, however, is the exception. His confused, on-again, off-again rulings on tariffs have rattled the market. Markets hate uncertainty and even Trump himself doesn’t appear to know exactly

Dividends

Investors know that the return on a share is made up of a capital gain plus the dividend. Private investors are mostly attracted to the prospect of making a capital gain on the shares which they buy and do not often consider the dividends. What they perhaps do not realise is that a capital gain is actually just the dividend in a different form.

Quarterlies

One of the major differences between the US equity markets and the JSE is that listed companies in America are required to report every 3 months, not every 6 months as they are on the JSE. The quarterly reports of the S&P500 companies are closely followed by investment analysts and predictions are made for their profits.

Gold's Record Run

On Friday last week, gold reached a new all-time record high of $2871.42 per ounce. Its gain in rands has been even more impressive rising from less than R1000 per ounce in August 1992 to last Friday’s close of R52864.85.

In our Confidential Report of March