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Is the JSE going through the biggest stock market crash since 2008?

by , 15 October 2014

“Hi Timon, are we going through the next stock market crash?”

There's a big worry going around in the world that interest rates are about to go up in the U.S. And that the German economy could already be in a recession.

Fear and panic has once again kicked into the JSE-AlSH 40 (JSE All Share Index 40 index), as people are starting to pull out of their long term investments.

But luckily you're reading this!

Because today, I'm going to shed light on this “stock market crash”, before you get out of your long term investments.

Let me explain…

Go back and compare 2008 and you’ll see why it’s not time to worry…Yet!

Looking at the weekly chart of the JSE ALSI-40 (that shows the top 40 companies on the JSE), you can see that it was going on a gradual uptrend happily from 2003 to 2005.

Things then started to heat up, as the JSE ALSI-40 started to accelerate to form an even steeper uptrend, from 2005 up to 2008.
Once it was top heavy, it then broke below the steeper uptrend at 26,146, which was the start of the financial crash.

If you went to your charts and drew in your trend lines, you would’ve seen that the JSE’s next target was to the support of the first gradual uptrend at 16,914.

And that alone, took the JSE ALSI-40 index down 35%.

So, that’s a crash, if you ask me! 

Now let’s go back to today and see what’s brewing on the JSE ALSI-40 

You can see from July 2013 up to July 2014, the JSE ALSI 40 index has been going up a similar gradual uptrend.

From July to August 2014, it started to speed things up as it went up an even steeper uptrend.

But then, trouble kicked in!

The JSE ALSI-40 index broke below the steeper uptrend level at 44,834 and since then, has been coming down.

But before you throw your toys out of the cot ask yourself, where is the next target?

That’s right, to the next gradual uptrend level at 39,332.

The only difference between then and now is that, it’s only 12% drop that’s expected from the break of the steeper uptrend…

So should you worry about your long term investments?

I’d say looking at the two charts, the JSE ALSI-40 is simply going through a healthy correction. Besides, you can’t expect the Index to go up steeply forever, as much as we’d like that!

The only time I would start to worry about a stock market is, if the JSE ALSI-40 actually breaks below the gradual uptrend line at 39,332 (target 1).

But if or when that happens, I’ll be sure to write to you to tell you what you can do about your investments.

Always remember,

“Wisdom yields Wealth”

Is the JSE going through the biggest stock market crash since 2008?
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