02 Jun 2015 JSE knee deep in the red!
Eish, what a month and bit we had. After making an all-time record high on 24 April when the All Share Index closed above 55,000 points for the first and only time so far, we have been on a slippery slope. The JSE corrected more than 6% from its high causing many stop-losses on our iTrade Fantasy League portfolio to trigger.
On 27 May FirstRand, Remgro and Sasol were sold and yesterday Mr Price also triggered. Today it was the turn of Billiton, which includes South 32, Capitec, Discovery and Woollies to get sold. Not all resulted in losses though as we adjust our stop-loss triggers to new highs on the share prices. In Woollies we still made a profit of more than R2,000.
The end result is that more than 60% of our iTrade Fantasy League portfolio is now in cash. Although the loss on the portfolio is nearly R40,000, it would have been much bigger had we not sold so many shares earlier when their stop-losses triggered. For example, we sold Amplats at R322.50 and it was R288 today, down 13%. We sold AngloGold Ashanti at R203.65 and it traded 8% lower today. That is the value of setting stop-losses and sticking to them in a disciplined way.
This is a healthy correction as the JSE ran much too fast and too far up to April. This correction brings the JSE All Share Index more in line with the Dow Jones and other US indices. On 24 April the JSE was up nearly 11% for the year to date while the Dow was flat. That was unsustainable. We alluded to this fact in our Blog on 8 May: Markets Correcting. Now the JSE is up only 3% for the year, a much more palatable level and from here on I think the JSE will again follow world markets, especially the US.
Global Purchasing Manager’s Indices (PMI’s) released recently have slowed, pointing to slower economic growth. The bad news is however good news for equity markets as the first FED rate hike is pushed further away, probably only in September or even later. The lack of attractive alternative investments in cash, Bonds and property will continue to drive equity markets higher. It is fine to smile if you called the “Sell in May and go away” adage, but where do you put your money now? Cash no, property maybe, Bonds definitely NO! From a technical point of view the JSE is close to support at 50,200 (a previous high as well as the 2 year trendline). Let’s wait and see if it holds.