Technical analysts said there are various negative factors holding the markets back, but these are not strong enough to force a major revaluation of share prices.
This explained the current situation where the All-share index fluctuates in a fairly narrow band between 51 000 and 52 000 points with profit takers and bargain hunters taking turns to direct the indices in a certain direction.
By midday on Friday, the All-share index was only 0.03% higher on 51 244 points and the Top 40-index gained 0.06% to 45 860 points. The All-share index initially rose sharply with about 0.5% before giving up all the gains to turn slightly upwards again just before midday.
The Financial index lost 0.15%, but the Industrial index gained 0.11%, the Resources index 0.7% and the Gold index 0.20%.
Besides the negative sentiment about the South African economy, Imara SP Reid said in its daily market snapshot that the markets are hampered by geopolitical factors such as the upcoming referendum on Scottish independence, as well as growing fear that American interest rates will rise soon, which will have a negative effect on markets worldwide, particularly emerging markets such as South Africa.
There is also growing concern on the state of the Chinese economy, which was highlighted by weaker than expected inflation data from China earlier this week. China is an important buyer of commodities and is currently not buying enough to meet the massive oversupply of metals such as iron ore, coal and manganese.
Investors are waiting for important economic data from China to be announced over the weekend, including figures on retail sales and fixed asset investment for August.
The low level of commodity prices such as iron ore are one of the reasons why South African resources stocks is currently under pressure. According to Imara SP Reid the resources stocks are exceptionally oversold, suggesting a marginal technical rebound, but this is not happening. The index, which traded at 54 891 points at midday on Friday, is now approaching an important support level at 54 000.
The low level of commodity prices is also the result of the strong dollar, which is going from strength to strength on expectations that American interest rates will rise soon. The dollar is currently the strongest since the financial crisis against most currencies, including the rand which traded at a 7-month low of R10.97/$ on Friday.
Normally the weak rand should support resources stocks, but at the moment the weak currency is at best a buffer against further losses. Major iron ore producers such as Kumba Iron Ore [JSE:KIO] is still trading at 52-week lows.
The focus on Friday stayed on the two listed cellphone companies, after Credit Suisse downgraded its rating of Vodacom [JSE:VOD] drastically. Credit Suisse said that Vodacom, with a larger subscription base, would be affected most by stronger regulation in the cellphone markets, which puts a limit on what cellphone companies can charge to relay calls from other networks.
Vodacom, which lost 3.3% on Thursday, gave up a further 1.42% to R127.95 on Friday, while MTN [JSE:MTN], virtually unchanged on Thursday, lost 2.98% to R254.02.
Despite the depressed market conditions there are still shares trading at new 52-week highs, including the investment company Reinet [JSE:REI], which traded 1.96% higher at R26.50, beating the previous record set in June. The share is now 33.8% higher than a year ago.
Sappi [JSE:SAP] increased with 0.28% to R46.20, improving the previous high set on Wednesday. Sappi is now 79.3% stronger than twelve months ago.