Where to?

Trading ended higher last Friday, allowing the market to post a weekly gain of 62.97 points or 0.97 percent as the benchmark Philippine Stock Exchange index (PSEi) settled at 6,521.64.

The close last week was, however, 6.35 points or 0.09 percent lower than the all-time high of 6,527.99 established last Wednesday, although it still enabled the market to post a total gain of 708.91 points or 12.20 percent since the start of the year. This was the market’s seventh winning week.

To review, the market made a net advance of 158.72 points when it closed at 5,971.45 on the first trading week this year, which consisted of only three trading days, on a total volume of 6.20 billion shares and value turnover of P19.47 billion. Foreign buying dominated total foreign trading during the week.

This was followed by another net weekly gain of 80.3 points on the second week as the market closed at 6,051.75 on a volume of 13.13 billion shares and value turnover of P57.15 billion.

Noticeably, the rate of advance dropped to about half.  A one-day selloff broke the market’s pace as it suffered a net loss of 72.61 points or 1.19 percent.  Foreign buying saved the week as it  hit P36.35 billion, compared to the foreign selling of P20.14 billion.

A two-day selloff occurred on the third week.  This, again, limited the market’s advance to a weekly gain of 87.46 points or 1.45 percent as it settled at 6,139.21.  Foreign buying hit P20.89 billion while foreign selling amounted to P20.76 billion. Total volume and value turnover remained the same.

The market’s rate of advance further slowed down on the fourth week.  It was hit by another two-day selloff.  As a result, the market managed to make a weekly gain of only 28.43 points or 0.46 percent as it settled at 6,167.64.

Were it not for the increase in foreign buying this week, the market could have posted a loss.

The market got better on the fifth week, with foreign buying growing bigger to P29.54 billion, compared to foreign selling of only P23.90 billion. The total volume was only 14.16 billion shares but the value turnover was P52.84 billion, signifying a greater market interest in big cap stocks.  The market ended the fifth week with a net gain of 150.97 points or 2.45 percent.

Despite a two-day selloff that occurred on Wednesday and Friday of the sixth week, the market was able to make a net advance of 140.06 points or 2.22 percent as it closed for the week at 6,458.67.

Due to a two-day selloff on Monday and Thursday last week, the market managed to move up by only 62.97 points or 0.97 percent.

The total volume for the week dropped to 11.45 billion shares while the total value turnover was down to P36.49 billion. Foreign buying and foreign selling stood almost even at P17.78 billion and P16.52 billion, respectively.

After the record performance of the market during the period covered, when 16 record highs were posted, it is now treading in what market analysts call “uncharted territory.”  In other words, it has broken out of known levels never before reached or attained.  Will it, then, continue to go higher?

Past three years

The market’s record in the past three years may provide some clues.  Like Wall Street and the other markets around the world, our market has been on a run-up, as in a bull market rally, after the subprime crisis of 2008.

The subprime crisis broke out in August of 2008.  This happened after the US market and equity markets around the world enjoyed a period of continuous uptrend for about three years.  This was also true with the local market.

The market, before the subprime crisis, has been on a rally.  However, the rally seemed to have reached its peak in December 2007.  And like the other equity markets of the world, ours fell into a downtrend thereafter.

Our market was recorded to be already at about 3,079.64 on Feb. 26, 2008.  By July 6, 2008 it was at only 2,450.55, down by 20.68 percent.

On Aug. 8, 2008, when the subprime crisis broke into the open, our market was in the process of a small rally; it was up at 2,602.38.

It took the market up to March 2009 to experience the full impact of the subprime crisis.  On March 17, 2009, the market was down 32.39 percent as it hit the bottom at 1,759.33.

Three months later or by June 2009, the volume of transaction started to build up.  This went on until December 2009.  On the last trading day of said year, the market was back at 3,052.68. It has risen by 1,293.35 points or 73.51 percent.

In the following 10 months, the market was moving lower, then higher like in a big pendulum swing that on Oct. 29, 2010, the market hit 4,268.74, up by 39.36 percent.

The market faltered and had moved sideways in the next five months until April 6, 2011 when it  went back to 4,212.52.

Due to intervening developments in Europe, the market pulled back again in the next four months that on Sept. 28, 2011 it was down by 12.47 percent at 3,687.12.

On April 23, 2012 or almost seven months after, the market hit its peak for the year of 5,163.09, up 22.57 percent.

Weakened by a month of selloff, the market fell by 3.97 percent to 4,958.43 on May 22, 2012. By July 24, 2012, however, the market was again up by 191.63 points or 3.71 percent at 5,354.72.

Since then the market moved sideways but as of last Friday, or seven months later, it was up by 1,166.92 points or 21.79 percent at 6,521.64.

Bottom line spin

After hitting the bottom of 1,759.33 on March 17, 2009, the market has been generally on the upward trend.

At last Friday’s close of 6,521.64, the market has moved up by 4,726.31 points or 270.69 percent from 1,759.22 in March 2009. In this regard, most of the market’s favorite stocks are already at the higher end of the price bands.  This may mean they are now susceptible to a selloff or profit-taking.

But judging from the way the market has been performing in the last seven weeks, the sentiments of market bulls (buyers) will continue to prevail.  However, the market may soon capitulate to a pullback before moving up again.

(The writer is a licensed stockbroker of Eagle Equities Inc. You may reach the Market Rider at [email protected] , [email protected] or at www.kapitaltek.com)