Last week’s selloff
The market’s selloff last week was something that you would expect to happen considering the trading results the previous week.
The market then ended with a weekly gain of 134.39 points or 1.68 percent. This raised the market’s previous weekly gain of 14.89 points to 800 points.
In the said week, the market also posted the all-time intraday high of 8,136.97 and another record close of 8,127.48 at the end of the week, which brought the market to its 26th record finish since the start of the year.
These developments provided the general conclusion that strongly supported the continuation of the market’s upward bias in the week ahead.
But as we look back, the market stalled from its advance last week. Its charge faded that it closed lower at 7,946.89, down for the week with total loss of 180.59 points or 2.22 percent.
Forces at work
Actually, there were telltale signs that presaged the market’s selloff last week, as I have pointed out earlier. About 50 percent of the market’s weekly gain was actually earned from the net gain on the last trading day of the week, on April 10. It ended with a net daily gain of 74.79 points or 0.93 points.
It should be noted that foreign investors were the net sellers for the day. Interestingly, the total foreign investors’ market participation during the day hit a high of 60.57 percent of total market transactions.
Based on these developments, the market’s advance for the day could be said to be the result of no other than the punting activities of local investors.
This was not the usual market normal wherein local punters are usually unable to absorb the selling activities of foreign investors, just like what happened when the market suffered its only loss for the week on Wednesday of April 8.
Another development that provided added clue to the market’s selloff last week was the industrial sector’s failure to continue with its advance. It signaled the possible failure of other sectors to perform. The prices of stocks in the other sectors, including those in the industrial sector, had reached their ceilings.
Local vs foreign punters
As to the question on which or what may critically affect the market’s daily or near-term direction, the results of the market’s selloff last week gave another classic explanation.
As shown, this was most of all determined by what the more dominant trading party in the market was doing. In this case, this was determined by the direction taken by foreign investors at the time.
For instance, the market closed lower last Monday at 8,073.25, with a daily loss of 54.23 points or 0.67 percent as a result of foreign investors’ trading transactions where they acted as net sellers for the day.
This was followed by another drop in the market’s price level when foreign investors turned to be net sellers again on Tuesday. The market index dropped to 8,056.49, with a daily loss of 16.76 points or 0.21 percent.
The market’s daily losses rose to 150.63 percent or 1.80 percent when foreign investors further became net sellers on Wednesday. The market also hit its lowest close for the week at this time at 7,906.46.
On Thursday, when the market ended with a daily gain of 41.74 points or 0.53 percent, foreign investors turned out to be net buyers for the day. The market was able to climb back to 7,948.20.
Again, the market fell to 7,919.61 on its session’s low last Friday and recovered before closing with a minimal loss of 1.31 points or 0.02 percent. Foreign investors remained net sellers for the day.
In the foregoing review, we can conclude that last week’s market was but another experience that showed the parallel connection between the market’s fall and foreign investors’ position for the day.
The connection was simply overwhelming that it cannot be dismissed as a mere coincidence. The connection was consistent in five out of five times or 100-percent consistency.
Bottom line spin
With last week’s selloff, the connection between the market’s fall and the incident position of foreign investors as net sellers for the day will certainly remain to influence the market’s behavior this week. This may even go on to influence the market’s posture till the end of the month.
A sign that may further corroborate this prognosis is the ongoing selloff in the various sectors of the market. All sectors were net losers last week. But compared to what they were four weeks back, their latest price levels remained high with the exception of the mining and oil sector.
The market’s long-term outlook remains positive. The credit standing of the country received another upgrade. This has, once more, elevated the country to a position of good standing as an investment destination and alternative. This will continue to allow the economy to further grow and expand—that will also render current asset prices comparatively cheaper in the not so distant time.
The selloff last week, therefore, was but a reflection of the market’s technical condition that has no significant impact on its long-term outlook.
Be that as it may, it pays to look closely at your profit margins and save whatever you still have in the face of the market’s latest selloff.
(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
