The game is on

I was initially skeptical about the market that I originally intended to come up with a less positive title for this article. While the market was still up since it resumed trading two weeks ago after the Holy Week, it was actually falling until it closed on Friday, April 20.

The market closed for the Holy Week on Wednesday, April 4, at 5,038.92. When it resumed trading on April 10, the market went on to pick up its pre-Holy Week uptrend.

Through slowly building up volume and value turnover, the market managed to post an increase of 58.38 points, or 1.16 percent, on a weekly basis, closing the week ending April 13 at 5,097.30.

It then hit a record session high of 5,219.29 the following week, on April 18. Even if the market ended lower at the end of the day at 5,186.2, this turned out to be still an all-time market high.

Despite these apparent net gains, however, the market’s advances in the last two weeks appeared to be trudging than swift and easy like the usual normal market run-up.

In particular, price advances were met with selloffs even if the market managed to end trading on Friday higher by about 59.16 points, or 1.16 percent, on a weekly basis at 5,156.46 points.

On a closer look, the market was actually skidding on a daily basis from the time it hit its highs on April 18.

Thus, although the market continued to register another net advance for the second week, it could already be at what is technically called overbought levels or the limit at which the market is no longer able to support higher prices.

In other words, the market’s trudging pace could be a sign that it is starting to find stock prices too high. As a result, share prices will soon go lower given the likelihood of profit taking or sheer selloff to preserve capital.

This may result in the market falling or moving sideways and consolidating.

But emboldened by the recovery of Wall Street’s Dow Jones Industrial index stocks last Friday and the result of my quick review on initial end-of-the-year reports of some listed companies and their plans and programs, I became more positive in my outlook that I changed the title of my article to “The game is on.”

Beyond the local scene

I could be wrong about my decision to change my market outlook from pessimistic to optimistic. The world equity markets continued to be spooked and emboldened by every small negative or positive development in the US, China and Europe.

But looking at how the US and the global economy have managed to move on in the last 18 months, I believe the worst of the US economy and, to a certain extent, of the global financial crises besetting Europe is past critical stage.

Based on last week’s news reports, the US economy experienced “the biggest gain in consumer spending in a year,” which in turn helped the US economy to “expand in the first quarter even as fuel cost climbed.”

Data of the labor department showed that “payrolls increased by 635,000 from January through March, the biggest quarterly gain since the first three months of 2006.”

This biggest gain in consumer spending was attributed to the continuing policy of the Federal Reserve to bring down unemployment by keeping borrowing costs low, which it plans to carry on all the way through 2014.  As a result, more businesses were opened and more jobs were created.  Better-than-expected weather condition and the rising oil prices were said to have contributed to higher retail sales, too. It encouraged foot traffic, enabling people to save on gas expenses which, in turn, allowed them to spend more for consumer items, the report added.

To quote, “the cost of a gallon of gas at the pump jumped 65 cents from the beginning of the year to $3.93 on March 31, which was the highest level in 10 months.”

On the other end, geopolitical hot spots that were seen before to threaten the balance of the world’s political and economic order do not seem to be as potent now to escalate to unmanageable proportions that may change the generally peaceful setting of the world’s political environment.

North Korea, by its own making, recently revealed its being far from having the powers to support its hard-line stance against the US and the world order. Iran, to some extent, also acquiesced to popular demand to stand down from its belligerent stance. The Syrian government has also agreed to the posting of UN observers on the ongoing ceasefire arrangements to remove pressure from local opposition.

These led stocks on Wall Street to recover last week and a stronger growth of the US economy in the first quarter. This was “the strongest three-month start” of the US economy since its “13.5 percent advance in the first quarter of 1998.”

Bottom-line spin

Again, I could be wrong about my outlook and investment advice about the market at the moment. I seek consolation to the fact that “being wrong is a fundamental assumption” to a trader like me.

Thus, I could be wrong about the real situation and sentiments of the market at the moment. This may affect right timing to enter the market, too. I could, therefore, be prematurely advocating to taking positions now, when one can actually position later.

(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.)