Is the JSE going through a correction or a crash?

by , 19 February 2018
Is the JSE going through a correction or a crash?
Turn on Bloomberg and all you'll see is red…

The Dow Jones Stock Exchange crashed over 1,000 points dropping 4.15% in a day.

The S&P tanked 100 points dropping 3.75% in a day. And the Nasdaq fell 275 points dropping 3.90% in a day.

Come back to our local stock market and you'll see a big market drop.
Should you start to panic with your investments or will this pass.

Today, I'll tell you whether I think the JSE is going through a correction or a crash…

Let's get on it…

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What you need to know about market corrections
 
According to InvestingAnswers.com here’s what a market correction is…
 
“A market correction refers to a price decline of at least 10% of any security or market index following a temporary
upswing in market prices”.
 
A very nice straight to the point definition if I do say so myself.
 
Next let’s bring up the JSE Top 40 chart to see if we have dropped more than 10% before we go on…



Now that we have the high and low index prices of the year which is at 55,120 and 48,620, next we need to see how much the index has dropped to using this formula…
 
=[(High – Low) ÷ High] X 100
=[(55,120 – 48,620) ÷ 55,120] X 100
=11.79%
 
This means the JSE has dropped 11.79% from the high of the year to the low of the year.
 
We have established according to the definition that the JSE is undergoing a correction in the market.

 



Do we buy now that the market is correcting?
 
I’m sure this is the next question you have on your mind…
 
And I’m going to have to emphatically answer you with a resounding…
 
NO!
 
I don’t think this is just a simple market correction.
 
According to a 75% winning break out pattern, it looks like the JSE is going to drop even further.
 
 The M formation is telling me the JSE is still set to drop further to 47,160
 
The M formation is one of my reversal break-out profit patterns.
 
All you need to know is that the price of the market forms what looks like the letter M. And then the price of breaks below the letter M which reverses and continues to the downside.
 
Take a look at the JSE Top 40 chart below to see the M.



 
To calculate the target of where I expect the JSE Top 40 market to drop to next, we use the breakout pattern formula. First you’ll need to know what the High and Low of the M formation prices are…
 
Target=Low of M formation - (High of M formation – Low of M formation) Target=51,140 - (55,120 - 51,140)
Target=47,160
 
 
 
As you can guess, I believe this correction is going to continue to the downside all the way to 47,160. This all together will be a 14.44% correction from the high…
 
So what should you do?
 
Well, 14% is more than a normal correction but nothing to panic about, with regards to your investments…
 
The stock markets tend to correct and then shoot up to new highs, as we’ve seen over the last couple of centuries.
 
Only if the JSE Top 40 market drops below the 47,160 target mark, I’ll simply write to you to tell you about the new target and what you should do to hedge your positions.
 
The reason is, below 47,160 the JSE will not only be in a correcting (down) market but will also enter into CRASH MODE.
 
But let’s not jump the gun just yet.
 
Until then, you can look at selling or (shorting) the local and international markets.
 
This is where you sell HIGH, Buy LOW and profit from the downside of the markets.
 
If this sounds like something completely new to you, then you’ll need to know more about how this kind of profiting works…
 
I offer you two options to get your portfolio up during these downtimes.
 
Option #1: To sell high, buy low and profit from international markets – Click here for details…
 
Option #2: To sell high, buy low and profit from the local JSE markets – Click here for details…
 
 
 
 


Is the JSE going through a correction or a crash?
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