ARTICLES

Correction

On the 10^th of July 2024, we tweeted (on “X”) that “...some sort of correction is looking more and more likely.” Four trading days later on the 16th of July 2024, The S&P500 index reached its highest point (5667.2) and began that correction. So far, the S&P has fallen 8,5%. Consider the chart:

The correction has included two “dead cat bounces” and two “exhaustion gaps” and it has gone further than the previous correction in March/April which only saw the index fall 5,5%.

So now the question is, “Has it reached its lowest point, or will it fall further?”

To begin with, it is our view that this is definitely a correction within a long-term bull trend – and not the start of a new bear trend. So, we fully expect that after this correction has run its course, the S&P will recover and go on to make further record highs.

Following the cycle low (4967.23) of the 19^th of April 2024, after the previous correction, the S&P entered an upward trend which was characterised by unusually strong bullish sentiment. The sentiment was so strong that the two “corrections” in that upward trend were flattened out by enthusiastic, mostly inexperienced, investors “buying the dip”. The two exhaustion gaps in the current downward trend show that many of those inexperienced investors have now been flushed out of the market after taking heavy losses.

Despite that, considerable bullish sentiment appears to remain present in the market. In the five trading days following the low point on 5^th August 2024, the market has again moved up strongly, indicating that there is still considerable belief that the great bull market will resume.

This correction came about ostensibly because of a rash of negative sentiment about the state of the US economy. But the reality is that the S&P had risen too far, too fast and was overdue for some sort of downward trend. The poor manufacturing data and the weak non-farm jobs report in July gave this position some credence.

The consequent flurry of profit-taking caught many of the less-experienced investors by surprise, causing some panic selling, especially on Monday the 5^th of August, when the index fell by 3% in a single trading day.

It is notable that the JSE Overall index (J203) has fallen by less than half of the fall in the S&P500, indicating that local investors did not and do not regard the downward trend on Wall Street as particularly serious or persistent. When considering this, you should remember that our market is well supported by overseas investors during periods when sentiment is generally “risk-on”. Consider the chart:

You can see here that the JSE Overall index, although volatile, has been in an upward trend since its low point of 63264 made on the 29^th of September 2022 and that it recently made a new all-time record high at 82765 on the 31^st of July 2024. The upward trendline is well supported by two touch points on the 26^th of October 2023 and the 18^th of March 2024. We fully expect that upward trend to continue.

In our view, this sell-off on the US market represents a potential buying opportunity.

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

Jackson Hole

Once a year in late August central bankers and academics congregate in Jackson Hole to discuss the state of the economy and consider the way forward. Traditionally, the Chair of the Federal Reserve Bank (“the Fed”) addresses the meeting and gives direction to its thinking on monetary policy in the US. This year, the comments of Jerome Powell resulted in the

Choppies

Choppies is a supermarket chain which operates in Botswana, Namibia and Zambia. It is listed both on the Johannesburg Stock Exchange (JSE) and on the Botswana Stock Exchange (BSE). Notably, the company has resisted the temptation to re-enter the highly competitive and cut-throat retail market in South Africa, having exited that market in 2020 due to sustained losses. Despite

Gold Resistance

All investments throughout the world can be ranked on a scale from high risk to low risk. As a general rule, in the world of investment, risk and return rise together. In other words, as the risks in an investment increase, so does the return necessary to attract investors.

At the one end of the scale there are very low risk investments

Sibanye takes off

We have been writing about Neal Froneman and Sibanye for years now. Beginning in 2013, Froneman assembled the Sibanye group over a period of 7 years, buying up mining operations both in South Africa and America at bargain prices. Initially he bought precious metals producers, but more recently he has been diversifying into base metals like zinc and lithium which

The 16 Year Bull Trend

Since the Second World War, the stock markets of the world, including the JSE, have always tended to follow the New York Stock Exchange (NYSE) - and the NYSE is best measured by the S&P500 index (S&P) of its 500 largest companies.

For this reason, we believe it is important for private investors to constantly

CA Sales Revisited

Retailing in Africa is difficult with many of our leading retailers having attempted to open stores in countries to the North of us without notable success. These countries are often unstable and volatile politically. Getting adequate stock to branches has proved problematic and expensive.

It is not surprising therefore that a company has been

Bluetel

Bluetel (BLU) is a company involved in pinless top-ups, prepaid electricity, ticketing and universal vouchers. As such it is a company with substantial repeat business from existing customers. This type of business model is attractive to investors because it implies minimal working capital and strong cash flows.

Bluetel’s purchase

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,