Maybe losing steam but not just yet

After an impressive weekly market advance of 328.76 points or 5.04 percent (buoyed by the upgrade given by Fitch Ratings on the country) when it closed for the Holy Week, the market retreated to negative territory last week, ending with a net loss of 120.33 points or 1.76 percent at 6,727.14.

In last week’s trading, too, the market was seen losing steam day after day except on Wednesday, when it recovered lost ground to gain 66.87 points or 0.99 percent. It is interesting to note that the market’s retreat last week was not the result of just the losses suffered by one or two sectors. It was the result of the aggregate losses incurred by individual sectors composing the main index of the market.

Equally notable is that, when the market made an advance on Wednesday, the reverse happened. The sectors composing the market were all up. The market had been breaking record highs since the start of the year. Its advances reflected the gains made by the individual sectors. This movement of the market is patent to its pregnant condition. It is obviously overbought or, in plain language, overpriced.

This is evidenced by the selloffs that it has been experiencing lately, motivated by profit-taking more than anything else. Partly because of it, too, the market slows down like it is losing steam or momentum. Be that as it may, the good news is that the market’s reversal may still be far from happening. Thus, it may continue treading on record territory.

Current condition

On the surface, the situation of the market can first be likened to its performance last Friday. It opened at 6,784.17, barely up 0.45 point from the previous day’s closing and hit the session’s high of 6,816.48 at midday, up 32.31 points or 0.47 percent from the day’s opening. It proceeded to hit the session’s low of 6,767.09, 17.08 points or 0.25 percent lower than the opening index and 59.39 points or 0.88 percent lower than the day’s high. When trading ended for the day, the market was down 31.58 points or 0.46 percent from the previous day’s close of 6.72714.

Also, when you look at the market’s trading performance for the week, you will easily see the market’s similar pattern of weakness. The market opened weaker on Monday and proceeded to close lower with a trading loss of 7.88 points or 0.12 percent. It further went on to lose another 91.16 points or 1.33 percent the following day, Tuesday. The losses were all wiped out on Wednesday with the market closing with a trading gain of 66.87 points or 0.99 percent. The gains were all again wiped out on Thursday as the market closed at 6,783.72 with a net loss of 31.58 points or 0.43 percent. The market fell back further by another 56.58 points or 0.83 percent on Friday when it closed at 6,727.14. As mentioned earlier, the market suffered a weekly loss of 120.33 points or 1.76 percent.

The weak appearance of the market starts to change when you look at the bigger picture and longer time frame—starting with its story for the last 30 days. On Feb. 22, the market was recorded at 6,667.41.  When it closed last Friday, it was up 59.73 points or 0.89 percent. While the gain seems small, the market’s movements throughout the whole month are revealing.

The market moved into some sort of a seesaw. It dipped to as low as 6,419.62 on March 20, rendering the market to fall and suffer a loss of 247.79 points or 3.72 percent. Nonetheless, the market climbed back immediately the following day. And by the close of trading last Friday, April 5, the market was up by a total of 310.52 points or 4.84 percent.

Bottom line spin

Another evidence of the market’s strength is its one-year performance record. On April 4, 2012, it was only at 5,038.92. Last Friday, April 5, or a year after, the market hit 6,727.14. This meant only one thing. The market was very strong. It easily whipped up a gain of 1,688.22 points or 33.5 percent. It did this through a series of advances and retreats that, in the end, culminated with a huge net advance.

Stretching further the review of the market’s performance for five years, the following observations stood out: On April 5, 2009, the market was pushing on upwards. At that time, the main index was at 2,197.20. After a year on April 5, 2010, the market reached 3,186.77. This brought the market to post a total gain of 989.52 points or 45.24 percent.

By April 4, 2011, the market reached 4,209.43. At this point, the market had advanced by a total of 1,022.66 points or 32.1 percent. On April 3, 2012, the market hit 5,056.48. By this time, the market had gained no less than 847.05 points or 20.12 percent.

As mentioned earlier, the market was at 6,727.14 last Friday, April 5. This meant the market gained another 1,670.66 points or 33.04 percent since then.

Interestingly, the market established the all-time record high of 6,847.47 on March 27, on the day Fitch announced that it was elevating the Philippines from speculative to investment grade.

Thus, with the continuing financial weakness in Europe and seemingly slow progress of the US economy, along with geopolitical tensions happening in the Korean peninsula and elsewhere in the Middle East or African continent, the market continues to depict an interesting long-term picture.

(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)