The market’s comeback

It looks like the market still has the power and resiliency to make a good comeback given its encouraging performance last week.

The market made a strong advance two Mondays ago as it made a net gain of 111.32 points or 1.62 percent, following a lackluster performance that has long kept the market below the psychological level of 7,000.

It was, however, only the following day the market was able to pull itself up above 7,000 as it closed at 7,055.49 on the back of another relatively strong advance of 93.56 points or 1.34 percent.

It lost steam the next two days but managed to bounce back on Friday to close higher at 7,138.91 with a net daily gain of 32.12 points or 0.45 percent. This time, foreign investors’ buying activities partly helped the market to climb even though their percentage of participation to total market transactions fell lower to 51.10 percent.

More details

The market’s run was neither isolated nor limited. It was across the board. The All Shares index ended with a net weekly gain of 122.56 points or 3.10 percent, with all subsectors’ individual indices also registering overall gains for the period.

In the process, the market’s total number of trades fell to only 281,104 or 0.48 percent, indicative of investors’ shift to higher-priced and/or valued stocks.

It is noteworthy that total value turnover went up on less number of trades. Thus, it is very possible that some accumulation or buy-back happened at the financial sector. Behind this play could be investors with the capacity to invest in the long term.

These “strong hands” may have also been present in the industrial, holdings firm, and mining and oil sectors.

Bottom line spin

Last week’s market performance is still far from being a confirmation of the market’s final turnaround. Much as we wanted to, market conditions here and abroad continue to give weak signals for a full market recovery.

Since the market’s closing bottom of 6,791.01 on Aug. 24, it had two failed attempts to bounce back.

The first was on Aug. 28, when the market landed back to positive territory at 7,098.81. The effort only resulted in the market being dragged down to 6,891.20 on Sept. 8, pinned down below 7,000 the following days, until it was able to close at 7,131.91 on Sept. 18.

The market’s triumph to bounce back to 7,000 only lasted for ten days. It was dragged further down to 6,815.59 on Sept. 28, which almost served as the market’s point of reversal.

Unfolding economic events worldwide, on the other hand, continued to eliminate the imminence of an equity market’s fallout as a remunerative investment alternative.

The major economic centers of Australia, Japan, Europe and China could not help but maintain a low interest regimen to prop up their weakening economies. Even the US might still find it difficult to proceed with its plan to bring back interest rates within normal levels.

Concerns continue to hound the true state of the US economy. While an increase in interest rates may serve to attract money back to the US, it may alter the economy’s regenerating competitiveness and productive capacity. An increase at this time, therefore, may just be limited—enough to serve its current fiscal needs.

If we are to rely on the trading results on Wall Street’s trading performance last week, we may predict that—to quote a US report—“a dovish monetary policy may yet persist” in the short term.

Under these circumstances, day and/or swing trading continues to be a preferred strategy. You need not indulge in speculative stocks to accomplish this. A lot of first and second line stocks have shown promise to day and/or swing trading.

For instance, Alliance Global Group, Inc. (AGI) shares closed last Friday at P18.46 apiece. This was a gain of 14.09 percent from its price a week ago.

LT Group, Inc.’s stock price on Friday, on the other hand, went up by as much as 17.09 percent to P11.58 per share week-on-week.

There were more stocks that made bigger returns in their price runs last week, but I’d rather advice that you confine yourself to first and second line stocks that are actively traded everyday and currently experiencing price volatilities.

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