Were you aware that the JSE Overall index hit a record high yesterday (June 18)? This is despite the goings on in Europe, which as an exporting bloc is dealing South Africa severe body blows. Were you also aware that our overall index is the only international all-share market index one that has reached new high? With everyone, apparently save stock market investors, quivering in the side-lines holding onto their cash like grim death, perhaps it’s time for a general wallet unzipping.

The share market again lived up to its reputation as a barometer as well before the results of the Greek election were known, the better market vibes had been apparent for more than a week. On June 6 the JSE Overall index bounced sharply upwards following its challenge to the lower edge of a standard error channel. In place since last year’s July dive, despite bedevilment by the European financial crisis, the channel has headed upwards as the index gained 20%.

The world is currently in an odd state of affairs whereby there’s a serious dearth of money on one hand and a ballooning glut on the other. Those with too much, current risk-averse money hoarders, are companies scared to expand, and private individuals unwilling to invest. The world is awash with bargains, but the moneyed will continue treading water until their confidence is boosted. We’re already seeing some quoted companies increasing their distributions to shareholder rather than growing their businesses in uncertain times. Private investors are eroding the value of their cash by keeping it in financial instruments yielding less than the rate of inflation.

Nevertheless, as a barometer, the chart of the JSE Overall index is beckoning companies and investors to dip their toes into new investments. Apart from the rise in the index plotting, the moving averages convergence/divergence (MACD) plotting (red solid line) gave a buy signal as it penetrated upwards through its signal line (dotted red line). There were other jittery penetrations between March and May, but this one that began well below the horizontal zero line of the MACD continues strongly upwards.

Currently still below the centre equilibrium of 34 800, there is plenty of scope for further improvement in the index. However it would be expecting too much to hope that it will reach the top of the channel, currently at 36 400, any time soon. Too much because using the phrase that everyone from the road sweeper to Barrack Obama throws around, all the Greek election has achieved is ‘kicking the can further down the street’. The can has already been kicked so often that, like our hope for a final resolution, it has become severely dented.

It remains to be seen whether the Greeks knuckle down under the current austerity programme or a redesigned one, but until stimulation is injected into the all markets, things are not going to get much better. Hopefully the G20 talks in Mexico, where I understand President Zuma pledged US$2-billion to the IMF to help Europe out of its debt hole, may beat the dented can back into shape via a stimulation of some sort.

Jean Temkin

“####(Click on the chart to see it more clearly)”