Raging bull run still far from happening

Excitement filled the trading floor of the exchange last Friday as the market closed at an all-time high of 6,891.43. Now, the market is technically free to make an unrestrained run through uncharted territory, so to speak. Looking at the week’s trading record, however, the prospects of a market rally that could turn into a raging bull run is still far from happening.

On Monday, the market managed to make a net advance of only 5.08 points or 0.08 percent as it closed at 6,732.22 and traded within a range of 41.62 points, hitting the session’s high of 6,745.42 and low of 6,703.80. The market opened 1.05 points below the previous close of 6,727.14, climbed 19.33 points to hit the session high. It gave in to selling pressure, dropping to the day’s low. It was, however, able to regain 28.42 points later.

Some market observers said last Monday’s trading performance was understandable as many market bulls (buyers) might still be on vacation since the following day, Tuesday, was a holiday. On Wednesday, the market made a significant net gain of 83.62 points or 1.24 percent to close at 6,815.84. Yet on Thursday, it managed to hit 6,813.74, up by only 15.9 points or 0.23 percent. This was followed by another modest advance of 59.69 points or 0.87 percent on Friday to hit what turned out to be an all-time high.

More analysis

People who feel that the market is ripe for a big run-up seem to ignore, or forget, the changing character of the market based on, among others, the trading volume and turnover value. The total traded volume last Monday was only 1.27 billion shares valued at P10.81 billion. This was proportionately equivalent to the volume and value turnover of the market the week before when it succumbed to a selloff due to profit-taking on mostly first line stocks.

This explains why the market was unable to climb on Monday. Transactions were largely dominated by the selloff mostly of first line stocks. Trading volume was low while total value turnover was significantly high. This is corroborated by the review of the market transactions for the rest of the week. Total volume on Wednesday was 2.62 billion shares worth P9.08 billion on smaller cap and dormant or speculative issues. On Thursday, total volume was 3.26 billion shares valued at P8.07 billion as more issues falling under the same stock categories continued to contribute to market turnover. The transaction on Friday further magnified this character of the market. Total volume hit 4.59 billion valued at P7.59 billion as trading of stocks like Alcorn Gold (APM) ballooned.

Except for Monday’s trading results, trading shifted to small cap, dormant or speculative stocks for the rest of the week. On Friday, for instance, top gainers were stocks like Federal Resources Investment Group Inc. (FED), a listed firm that has not actually traded in big volume. It was followed by similar stocks like Roxas Holdings (ROX). Also gaining during the week were iRipple (RPL), Megawide Construction (MWIDE). Medco Holdings (MED), TKC Steel, Cirtek Holdings Philippines, DMCI Holdings and Philippine Realty and Holdings Corp. (RLT).

Bottom line spin

If you look at the market’s overall performance for the week, it had certainly done very well. It made a weekly gain of 164.29 points or 2.44 percent, which was also indicative of the market’s momentum. This momentum, however, seems to come more from transactions arising from second to third line stocks. Based on recent experience, where the market ended lower whenever transactions come from first-line stocks, the market is very likely to stay at present levels and that it will not yet move up that soon and that fast. The market will need more time to allow new fundamental developments to take effect. This means it will still have to go through further consolidation.

To hazard a forecast, the market will probably move up again into a fast run-up when the country’s credit standing gets the endorsement of the two other international credit rating agencies.

(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)