Sifting through the index
The market last week ended higher after a two-day rally on Thursday and Friday. But this was not enough to turn around the market’s overall trend that continued to move sideways to lower on a weekly basis.
As it looks now, the about 200-point net advance of the market in April had driven up stock prices at some overbought levels (overpriced) that, more or less, consigned the month of May to profit-taking.
This certainly makes sense when we look a week further back at the charts: The market made a stunning advance of about 281.44 points week on week between the close of trading on March 25 and April 1.
In particular, the benchmark or Philippine Stock Exchange index (PSEi) closed at 3,848.10 on March 25. For the week ending April 1, the PSEi closed at 4,129.34. This adds up to a market climb of 281.44 points in one week.
Stepping back
Stepping further back at the start of the year, stock prices were already soft as a result of the failure of the market in December to sustain a momentum.
The absence of more positive news that followed, particularly about the state of the global economy as made more worrisome by the seemingly faltering stride of the US economy to recover, drove the market to plunge in early January.
The fall only stopped before the close of February when the market hit a trading session’s low of 3,705.58 on February 23.
The recovery was not that easy as it proved to be more of a struggle. It did not gain momentum, not until the week of March 14 to 18 when the market gained footing as fortified by the amount of money that entered the market in conjunction with the listing of the shares of the recently held public offering of San Miguel Corp. and on more foreign investors’ buying volume for the week.
What followed next was an almost steep market run-up that propelled the benchmark index to reach the high of 4,344.10, or 638.52 points, from the low of 3,705.58 on April 28.
Bottom-line spin
With the indexes reflecting the market’s direction, it would obviously appear that the market should continue to move sideways to lower in the near term.
The benchmark index suffered a loss of about 100.44 points in the first week of May. This was followed by a rebound of 73.04 points the following week, which proved to be just a normal rally. This was because the market continued its slide on the third week to a net loss equivalent to 6.95 points, followed by another net loss of 10.65 points by the end of the fourth week.
But since the month of May still has to end within its fifth week, which also falls as the first week of June, the market has two more days where to discount breaking news over the weekend that point to better-than-expected results taken by the free world economies to stem worldwide economic growth; Wall Street trading responded positively just like that last week.
Correlating the pattern of the benchmark index with other simple trend indicators such as the predictive advance and decline model, we see an increasing incidence of stock advances than declines.
As a rule, when there are more stocks that are advancing than are declining, the market is considered strong or positive—a large number of advancing stocks is considered a sign to confirm a broad market uptrend.
Thus, seen along with the stock plays that are happening and expected to happen in the future due to stronger market fundamentals, the market should be hitting the bottom soon. This may serve as the turning point for the market to resume its primary upward direction that can be gathered from its 638.52 points movement between February 23 and April 28 and the two-year bull trend from the beginning of 2009 to end of 2010.
Seasonally, too, June and July are positive months. Stock declines become less than advances, paving the way for the market to gather more breadth and get ready to change direction.
Spice your day with laughter
While waiting for this to happen, let’s turn to some jokes. As is said, “All work and no play makes Jack a dull boy.” My good friend who teaches in that girls’ college in Quezon City has sent some samples.
Let me start with my second pick. It’s about a husband and wife arguing about their relationship. Their exchange went this way: “Man: Maghiwalay na tayo (Let us separate). Wife: Sige, maghiwalay na tayo (Okay, let’s separate). Man: Akin ang bahay (I’ll take the house). Wife: Akin ang farm (I’ll take the farm). Man: Akin ang kotse (I’ll take the car). Wife: Huwag mong isama yong driver, matagal na sa akin ’yan (Don’t take the driver, he’s been mine for a long time). Man: Magkakamatayan tayo, akin siya! (Over my dead body, he’s mine!)
If that did not even get a little grin from you, here’s my best pick: It’s about a parsimonious woman, Mrs. Tanoy: When her husband died, she inquired with the newspaper about the cost of an obituary. The advertising clerk advised her: “It’s P300 for five words.” That stingy, she bargained if she can use two words only to save on money like, “Tanoy dead.” The advertising clerk told her: “No madam, five words is the minimum.”
After thinking for a while, Mrs. Tanoy came up with this ad. It read: “Tanoy dead. Toyota for sale.”
Have a great day!
(You may reach the Market Rider at [email protected] or directly at www.kapitaltek.com.)
