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The recovery is part of a worldwide trend as markets in Asia and Europe also followed Friday's rally on Wall Street.
The JSE made up a major part of its recent losses over the past three trading days with the All-share index again close to 50 000 points and the Top 40 index once again above important resistance levels.
In afternoon trade the All-share index was 0.69% higher on 49 727 points and the Top 40 index gained 0.77% to 43 991 points. The All share, which was last week almost 10% lower than its recent high when it reached 47 000 points, is at a level of close to 50 000 points now only about 4% lower than the all time high of just above 52 000 points set in the third quarter.
The Top 40 is also now above the important support level of 43 600 points which is regarded by technical analysts as critical support for future gains.
The rally was started by the Fed's announcement last week that it will be keeping US interest rates low as long possible, which means that fears that liquidity will dry up now that the Fed's quantitative easing has stopped, are unfounded.
Investors also expect that the European central bank will also announce measures early next year to improve liquidity in the eurozone to stimulate the economies in that region. A major part of additional liquidity will find its way to emerging markets like South Africa.
Investors have also decided that energy and resources stocks have fallen far enough with these shares recovering strongly on all major markets, although the oil price remain in the doldrums with the price of Brent crude hovering around $60 a barrel.
The news about interest rates will also put a damper on the dollar's strong run which is good news for commodities and resources stocks.
The Resources index opened sharply higher on Monday and was at one stage shortly after the opening more than 1.5% higher than Friday's close, but it lost ground steadily in the latter part of the morning's trade and by midday was only 0.74% stronger.
Most of the big resources shares gave up a big part of their gains earlier in the morning. One of them is Sasol [JSE:SOL] which was almost 1% higher on R450.00, but then lost ground. By midday it was again 1.02% lower on R447.51 but it is still 10% higher than the low of R392.78 set last week.
Kumba [JSE:KIO] was at one stage more than 3% higher on R254.99 but by midday it gave up a lot of those gains and traded only 1.26% higher on R250.12. It is however still more than 7% higher than the 52-week low of R232.50 set last week BHP Billiton [JSE:BIL] traded 1.78% higher on R250.43 after being more than 3% higher on R256.01. Last week the share reached a low of R237.32, more than 5% lower than Monday morning's level.
Anglo American [JSE:AGL], which was last week at a 52-week low of R204.39 traded at R215.41 by midday on Monday, which is 0.21% lower than Friday's close but 7% higher than last week's low. Earlier the share price reached R221.35 which was also more than 3% higher than Friday's close.
In the Industrial sector, which improved with 0.74%, SABMiller [JSE:SAB] gained 1.28% to R613.00. Naspers [JSE:NPN], which made strong gains in last week's run, was 0.15% higher on R1 478.83 after a poor start on Monday morning.
Nedbank [JSE:NED] was 1.31% higher on R246.42, just below the share's 52-week high of R246.46. The Financial index was 0.84% stronger.
