Will the market keep up?

Today is February 14. Christian tradition observe this day as a feast in honor of the three known saints of the same name in the Catholic Church. It was then known as “St. Valentine’s Day.”

The feast, however, “was deleted from the General Roman Calendar of saints in 1969 by Pope Paul VI,” according to published references. Due to this development, February 14 lost its berth and ranking in Christian tradition as a major religious feast.

However, since February 14 was not just a product of Christian tradition but also that of ancient Roman culture, it retained its social significance and value along with its Christian-inspired name as “Valentine’s Day” in our secular life.

So today, let me wish you all a “Happy Valentine’s Day!”

General overview

Last week, the benchmark index continued to trade on positive territory. Total value turnover remained strong at P47.16 billion over a volume of 39.35 billion shares. This performance, however, resulted only in a net market advance equivalent to 24.95 points, or 0.52 percent, on a weekly basis as trading closed Friday at the benchmark index level of 4,796.62.

In comparison to the results of trading the week before, which was for the week ending February 3, last week’s market performance paled in strength and bullishness. For the said week, total business transaction amounted to P57.79 billion over a volume of 37.22 billion shares.

If you will notice, total value turnover was significantly bigger by about P10.63 billion, or 22.5 percent. On the other hand, total shares transaction was obviously about 2.5 percent lesser than that of last week’s total market volume. Based on experience, this can only mean one of two things: Either the prices of stocks were trading at higher prices on a per share basis or that the market was generally perked up by big cap stocks transactions.

Either way, one cannot but conclude that the market then was evidently bigger and more bullish while the market last week was smaller and bearish. This is because the market’s rate of advance last week had slowed down to only 24.95-point, or 0.52-percent, advance on a weekly basis compared to the about 100-index point average weekly advance displayed by the market in the last four weeks.

Stretching our review of the market’s trading performance all the way back to January, the market’s slowing down rate of advance last week—and very possibly this week—was inevitably coming.

On the first week of January, the market made a net weekly advance of 111.40 points, or 2.55 percent, as it closed at 4,483.36 as against the immediately preceding week’s benchmark index of 4,371.96. This was followed by another stellar performance on the second week by another weekly advance of 130.47 points, or 2.91 percent, as it closed at 4,613.83. Stronger than ever, the market made another weekly advance of 139.07 points, or 2.91 percent, as it closed on the third week at 4,747.90.

By then, the market had made a total net advance equivalent to 380.94 points, a trading gain that had never been seen possible since the world equity markets tanked in 2008 as triggered by the financial meltdown and resulting economic slowdown that occurred in the United States and subsequently spread to undermine the global market. Considering the still unstable and unpredictable state of the global economy, it is not difficult to imagine that as of the end of January, our market was already on overbought territory. That was why the market skidded by 68.01 points, or 1.43 percent, at the close of trading on the fourth week at 4,679.89.

In summary, the rise of stock prices in the past weeks has been too much and too fast that while the market still continued to close higher up to last week, it is very possible that it is already losing steam. The estimated fundamental values and actual market prices of stocks in play are becoming too afar and too fast apart at the moment.

Bottom-line spin

Bringing down the analysis on an individual stock level basis, the foregoing conclusion on the state of the market cannot be denied by just looking at the 52-week high and low price performances of some stocks.

Look at recent market favorite GMA Network Inc. Its common class shares (GMA7) traded in the last 52 weeks from a low of P6.18 to a high of P10.20 a share. As of last Friday, as the market was then spooked by discouraging developments that may again set back financial reforms aimed at strengthening the global economy and the world’s equity markets, the price of GMA7 seesawed from the high of P9.20 to the low of P8.42 and closed near the session’s low of P8.50.

GMA7’s price performance last Friday may still look contrary to the market impression I said is unfolding, but if you look closer at where its price was 52 weeks ago or even just a month ago, the price of GMA7 is essentially losing steam and may likely settle sideways to lower in the coming days. GMA7’S share price in the last one month ranged from the low of P6.65 (established on January 13) to the high of P9.92 (established on February 6). Its closing price of P8.42 last Friday, February 10, is a clear sign that its price trend is heading toward the lower spectrum of its price band. Conversely, this could possibly be its immediate trend as its price as of last Friday was still near the higher end of its established price range.

Make no mistake that the current market price of GMA7 cannot be justified by sound fundamentals. It’s just that at this point in time, its claimed fundamental values are not yet about to materialize. Considering this reality, the market price of GMA7 as with the other stocks that had been in active trading play with the investing public may have moved too fast and too far from their approximate real values at the moment.

In view of the foregoing observations, we may soon expect the market to cease from its upward climb and proceed to “move sideways to lower.”

The writer is a licensed stockbroker of Eagle Equities, Inc. You may reach the Market Rider at [email protected] or directly at www.kapitaltek.com.