Today is April 1: “April Fool’s Day!” It’s a special day observed in many countries, including ours. It’s not a declared holiday, though, for it’s just the day of harmless pranks, jokes and hoaxes.
Realizing this may be the first time my column is coming out on April 1, I thought I might just write easy and freely.
Sometimes referred to as “All Fools’ Day,” the origin of this event is obscure. One that commonly fetches credulity is an account that goes back at the time when the “Gregorian Calendar” was adopted in France. The new calendar “shifted the observance of New Year’s Day from the end of March (around the time of the vernal equinox) to the first day of January.”
“Some folks, out of ignorance, stubbornness, or both, continued to ring in the New Year on April 1,” the account claimed. These people, as a result, were “called fools” and “made the butt of jokes and pranks on account of their foolishness” by those who adapted to the new calendar.
The account went on to say that “the incident became an annual event” that, in turn, “ultimately became an annual tradition throughout the western world.”
Not just yet
I concurred with the observation the market could be in some form of consolidation, a term used in technical analysis to describe the movement of a market or price of a stock that is more or less trading within a range and moving largely in sideways fashion. I also made an added guess that, by last week, the market might give some signs as to what of the two processes in consolidation is operating, which are accumulation and distribution.
The process of accumulation or distribution is difficult to differentiate at first. They become only detectable after a time when enough volume and value turnover had come into play. Divergences in the pattern of movements between volume and value turnover essentially serve as determinant milestones as to which of the two processes are working in the market or stock’s price.
Since January, the market had been on the ascent. By the first week of March, it hit a high of 6,550.94, up 11. 22 percent. But since then, every time it came near this level, it met resistance and was always pushed back to the 6,300 level, rendering the market to trade within a range.
Last Monday, the market attempted to head higher but the highest it could manage was 6,403.05. By Thursday, the market was down to the low of 6,307.92. Unlike the prior two weeks, however, the market ended with a weekly gain of 20.36 points or 0.32 percent as it closed at the session’s high of 6,359.62 last Friday. Concomitantly, weekly foreign buying grew 30 percent than selling transaction. Positive as they are, present market data still need more signs to confirm which of the two processes in the market’s consolidation is now at work.
Bottom line spin
At the end of trading last March 21, the market stood at 6,339.26. At the time, P/E ratios were estimated as follows: Financial index at 12.82x, Industrial index at 18.22x, Holding firms index at 7.22x, Property index at 24.07x, Service index at 26.26x, and the Mining and Oil index at 26.58x. The PSEi and All Shares indices were at 19.06x and 18.22x, respectively.
P/E ratios may not be ideal indicators of value but they are certainly relevant, for we make money out of the margins realized in the play of market prices. We have not been used to these levels for a long time, not even during the bullrun of 2007 that was cut short by the subprime crises of 2008.
If they are already these high at current index levels, just how much higher will P/E ratios have to be for the market to hit 7,000 and beyond? This may explain why the market continues to hesitate from advancing much further beyond 6,500. But don’t be stopped by the present level of market P/E ratios. In the end, intrinsic values prevail. Many stocks continue to find new value and growth prospects.
Just last week, we heard these news: One company seems to be set in selling a subsidiary to further improve its liquidity and have the chance to go after big-ticket investments that may enhance its value. We also have a company ready to gobble up the intended sale to further widen the array of its product lines that could provide synergy to galvanize its growth prospects.
So, stay alert. New market opportunities continue to abound.
The writer is a licensed stockbroker of Eagle Equities, Inc. You may reach the Market Rider at marketrider@inquirer.com.ph , densomera@msn.com or at www.kapitaltek.com