So far, the PSEI?s 3,133 psychological mark has remained technically to be the market?s price index level to break. It was established on Jan. 15 this year.
Previous to this, the market?s high was 3,130. It was set on Dec. 2, 2009.
In practical terms, these index figures are statistically the same in value and function. They have no significant difference as the market?s resistance indicators then and now, or vice-versa.
This brings me to the notion that the market is possibly following a price pattern that will only make sense when you look at the bigger picture?which, incidentally, downplays the importance of PSEi?s 3,133 mark.
Market review
In retrospect, December was a big let-down. Trading failed to come up with the so-called Santa Claus rally that usually sent market prices higher during the season. The market never got the chance to climb any higher when the PSEi peaked at the 3,130 level on Dec. 2 and closed for the month at no more than 50 points above the 3,000 index.
This was followed by trading in January that came in the form of a market trying to rebound. However, like how it was in December, the market peaked prematurely at the 3,133 level on Jan. 15. After which, it was downhill up to the end of January, rendering it to be another disappointing month as it closed lower by 30 points below the 3,000 level or some 80 points from the previous month?s closing index.
The market was sliding lower when the month of February set in and it was not until the market had fallen lower by another 50 points from January?s closing index when it reached the 2,823.40 depth on Feb. 10. This proved to be the market?s bottom.
The momentum of the reversal was relatively strong such that by the end of the month, it was able to recover all lost ground below the 3,000 mark to close at 3,043.75 on Feb. 26.
Since then and up to last week, the peaks attained by the market during all those times continued to serve as intermediate resistance points. The bottom hit, on the other hand, continued to serve as the market?s main support level. In the meantime, PSEi?s 3,133 level remains to be the major resistance point. Or so it seems.
More recent angle
As of the close of trading on March 5, the market stood at the 3,069.63 mark. It is 246.23 points away from its lowest established bottom. It is also only 63.37 points away from the technical breakout mark of 3,133?which has stayed unbroken since Jan. 15 or, for that matter, since Dec. 2, 2009.
In connection with the upbeat trading results on Wall Street and elsewhere the world over last Friday, the market is poised to retest PSEi?s 3,133. But based on obtaining technical studies, the market is trading in oversold territory, which implies that market prices are still simply high.
Said the other way around, the current price levels are still prone to selloff and/or profit taking. As such, they are more likely to go down. The market, therefore, has to still find a way to first shed its oversold condition. It has to continue to trade sideways to lower until it finds a reversal point. Or has it already found it?
Some reflections
It is very possible that the market may not yet retest the 3,133 level. For one, daily volume and value turnover had remained essentially weak and small. Daily money flow has been coming in only in the magnitude of P2 billion or so. It has not grown back to its more healthy size of more than P3 billion daily that has proven to churn some price runs in the past.
Nonetheless, the market has been looking for reasons to trade more aggressively. Its manifested willingness to play along with small caps and speculative stocks lately is an indication that it is prepared to enter the market in a larger way given the excuse or reason to do so.
I believe that the worry of an election failure is keeping the market to appear overbought (characterized by higher prices) as technical indicators signify. Investors who are obviously idle on the sidelines are actually not ready to enter the market again. Thus, the market?s current tendency to sell or take profit right away is but the product of the market?s restiveness about the national elections.
Bottom line spin
The market?s current price pattern is largely a product of the subprime crises that broke out sometime in August 2008. Since then, it has been reacting to the different measures undertaken to contain and resolve it.
From that overview, I believe that the market is already at a certain turning point. The objective is about some 300 points from where it presently lies. It will realize this in the next three months. The national election, though, is a factor that could spoil it from happening.
With the holding of a successful national election, the market will continue to climb higher. In the next three months, the market should be within a striking distance of the 4,000 level.
This prognosis is taken from an old trick used by some legendary traders of Wall Street in second-guessing the market. They look at the market?s wider price pattern from a distance. From where they stand, they make out a decision from whatever pattern they see.
Admittedly, this idea is more exotic art than science, for some say that the human mind can see patterns where there are none. But again, stock investing and trading involve the practice of science and art?and this prognosis may just prove right.
You may reach the Market Rider at marketrider@inquirer.com.ph or directly at densomera@yahoo.com
