Market may be heading higher

When the market broke out from 7,000 sometime in late April, the market established new record highs. This went on until May 15, when the market hit its all-time high of 7,392.20.

After the nearly 400-point advance, the market went into what could be described as a daily resurgent but weak rallies that in the end always faltered owing to the market’s overbought situation or investors’ increasing resistance to higher stock prices. All hell broke loose on May 30. The market opened strong but slowly lost power along the day. By the day’s end, the market had tanked. This happened just when the government came out with the official announcement that the economy for the first quarter grew by 7.8 percent, a GDP growth rate that catapulted the country’s economic performance to number one compared to that of other economies in the region, including China’s.

On hindsight, the market fall was triggered by the selling activities of foreign investors early in the week that continued up to May 30. As a result, the market suffered it first single biggest day’s loss of 275.22 points or 3.81 percent, which sent the main index to drop to 6,953.35. For this triple-digit loss on May 30, the market ended with a net weekly loss of 246.96 points or 3.40 percent.

Last week

Last Monday, the market continued to fall with another three-digit loss of 258.57 points or 3.68 percent that brought the market to settle at 6,763.38. The market attempted to rally on Tuesday, in the same way that it did on May 30 when it incurred a triple-digit loss. But due to the market’s growing uncertainty, fear later gripped investors that even diehard market bulls resorted to day-trading.  This made the market to again fall lower by another 89.91 points or 1.33 percent at 6,673.47.

The downturn continued on Wednesday. The market incurred a further loss of 115.58 points or 1.73 percent, which sent the market to 6,609.01. This meant, too, that the market had incurred an additional loss of 464.06 points or 6.61 percent since the beginning of the week. Just then, a different story unfolded in markets across the globe as they opened on Wednesday. On Wall Street, its major indices rallied following breaking news that pointed to more signs of future market uptrend.

This emboldened local investors to reenter the market and spur a buying spree that made the market realize its first trading gain for the week of 51.12 points or 0.78 percent. Total value turnover for Thursday went up by more than 15 percent from the market’s recent daily average. This increase in total value turnover also served to neutralize the selling activity of foreign investors, who were net sellers for the day—unloading P7.6 billion while buying P5.89 billion.

On Friday, the market rallied with an additional gain of 92.94 points or 1.41 percent that led the main index to close at 6,701.95. The rally appeared to be spurred by a buying binge mostly of “high-cap” stocks as total value turnover was significantly big at P9.56 billion when total volume was relatively small at 1.39 billion shares. For instance, all of the 20 most active stocks were “big-cap” stocks. Despite the fact that three of these issues actually declined from their previous prices, their losses were offset by the gains made by the 17 others.

Bottom line spin

While the market’s two-day rally last week was encouraging, it was not substantial enough to bring back the market to positive territory. At the close of trading last Friday, the market was still down with a total weekly loss of 321 points or 4.56 percent. When added to the prior week’s net loss of 246.96 points, it would seem to show that the market had alarmingly fallen by 567.96 points in just two weeks.

Looking for answers, we may realize that the market had made a net total advance of 1,258.23 points or 21.16 percent from January to April this year—429.98 points in January, 478.71 points in February, 126.02 points in March and 223.52 points in April. In May, the market followed up with weekly advances of 189.91 points, 47.03 points and 17.49 points. In the process, the market chalked up a total of 254.43 more points. This delayed or suppressed the early appearance of the market’s characteristic of being a seasonal “sell” month.

Going back to the trend in the first five months and in the first three weeks of May, the market’s retreat or correction seemed to have been pending like a writing on the wall, so to speak.  The market had possibly reached its exhaustion or turning point that it had to fall. The market’s fall can continue further from where it was last Friday. Yet, something tells me that its downward spiral is about to end. There are subtle signs that it is hitting bottom or market support.

For instance, market leader Ayala Land Inc. (ALI), while its stock price has been always way above the price-earnings multiple applied by investors to similar stocks and that it must adjust proportionately, its usual pricing is slowly coming back. When the market tanked on May 30, ALI close at P32.75 a share. Its price hit a low of P30.15 on June 5. On Friday last week, the stock price of ALI has risen at the closing price of P31.50.

Considering this price trends, one may conclude that ALI’s price direction is not yet that firm. But considering all other observations, ALI’s stock price could now be considered a good buy, just like the thought of assuming that the whole market could be heading higher this month of June.

(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)