ARTICLES

Watch and Wait

During a bear trend, private investors are best advised to stay out of the market and wait for the bear to end before buying back in. This will take some patience and fortitude. There will be times when it seems that the bear trend is over, but we remind you that nothing in the market moves in a straight line. Bear trends are always broken by rallies. There are always bursts of optimism inevitably followed by further despair.

In the current bear trend, which began on 3^rd January 2022 with the S&P500 at an all-time record closing high of 4796,56, we have had two significant rallies and we are in the middle of the third. Consider the chart:

In the chart above the three major rallies are marked with red lines. The first rally began on 8^th March 2022 and lasted until 29^th March 2022. It took the index up 11%. The second rally began on 16^th June 2022 and lasted until 16^th August 2022 and took the index up 17,4%. The current rally which is still in progress began on 12^th October 2022 and so far, up to last Friday 11/11/22, has taken the index up 11,6%.

The chart shows how, since its high on 3^rd January 2022, the S&P has been making a series of lower cycle highs – which we have connected with a downward trendline. It also shows a series of three descending lows (marked with blue circles). So, there can be very little doubt that we are in a bear trend – and that the current rally will almost certainly run out of steam – probably when or before it encounters that downward trendline.

The current rally was given energy by the latest US inflation figures which came out last Thursday (10/11/22). They revealed that the consumer price index rose by 7,7% - half a percent lower than the previous month’s figure. The bulls leapt onto this and pronounced that now the Federal Reserve Bank’s monetary policy committee (MPC) would certainly “pivot” and increase rates by only 50 basis points at its next meeting. Some are even suggesting that the hike will be as little as 25 basis points.

We believe, once again, that this optimism is misplaced. As soon as the MPC or the Governor of the Federal Reserve Bank once again reiterate their determination to bring inflation in the US down to 2%, the optimism will evaporate (as it did in the previous two rallies) and S&P will, once again, collapse to a new lower low.

So how should you, as a private investor, respond to this situation? Hopefully by this time your stop-loss strategy has taken you out of the share market and you are sitting in cash. If that is the case, then each successive low in the bear trend should make you more excited – because high-quality blue-chip shares on the JSE will almost certainly get cheaper and cheaper.

You should be watching and waiting for the bottom. But that bottom can only come when the bulls have become completely dispirited. They have to reach a point of utter despair known as “capitulation.” It is very difficult to know exactly when that point will be reached – but while you are still seeing the S&P making absurd 5,5% one-day jumps – as it did last Thursday, the 10th of November 2022, – you know that you are not there yet.

It often takes considerable fortitude and patience to stay out of the market, but the wait is worthwhile. In the end you will be able to buy some of the best shares on the JSE for ridiculously low prices.

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

The Debtors' Book

A BIT OF HISTORY

Many years ago, in 1982 when I started this business (which became “PDSnet”), I ran advertisements in both the Rand Daily Mail (RDM) and in the Star – which were the two most widely read newspapers in Johannesburg at the time. At that time, we were a very small business and had no credit rating at all. Despite this the RDM immediately

WeBuyCars - Results

The financial results of companies show how profitable they are and give a good indication of their share’s risk and potential return. WeBuyCars (WBC) is a recent listing which came to the JSE on the 11^th of April 2024. Unlike other listed motor vehicle companies, it is a company which specialises in the purchase and sale

Choosing Winners

We are often asked how we go about selecting the shares to put on to the Winning Shares List (WSL). Right now, there are 102 shares on the list with 5 having gone down since they were added, 94 are up and 3 are unchanged. On an annualised basis, 24 of them are performing at above 100% per annum.   

As a private investor,

Kore Revisited

Kore (KP2) remains at once the most exciting and most risky investment on our Winning Shares List (WSL) at the moment. We originally added it to the list just over a year ago on 16^th May 2024 at a price of 20c. It subsequently rose to a high of 83c on 3^rd October 2024 and we published an article

Rand Strength 2025

The strength of the rand is both a critical and a complex issue for private investors on the JSE. Our currency is influenced by two primary forces:

1. Our local economy’s prospects
2. The rand’s role as a leading emerging market currency

These, in turn, are

Sibanye Revisited

In these uncertain times, when nobody really knows to what extent Trump will back down on the international trade war which he has initiated, many investors are moving into precious metals as a hedge against the weakness of paper currencies (especially the US dollar) and paper assets like equities and bonds.

The problem

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