November 9 Report (on November 10)

I still can't log on to Technistock. Too bad. Let's go on with what I have, which is a newspaper.

Market Commentary

Our market was up by 11points yesterday to close at the level of 3,703.66. The mining and oil index spurred the advance of the Index, up a record 491 points. The financials and the property companies were inched down, for some reasons that I'm pondering over right now.

For the financials, let me make a correction, BPI has not yet reported anything (well based from my check yesterday on Technistock). Only RCBC and UBP has reported earnings. This is a fundamental scare for me. Does this mean that our local banks have exposure to sub-prime related investments (I shudder at the oxymoron of placing investments along with the words sub-prime).

For the property companies, I expect that next week, these should go up because of anticipation of a BSP rate cut. One of my top pick would be MEG, which has been beaten black and blue despite the slight increases of the index this week. ALI should also benefit given that they are the leader in the property sector.

The reason why the mining index went up by that much is mainly due to a Felipe Yap stock, Lepanto. I remember that I highlighted this stock in early August at the Absolute Traders forum, too premature I suppose. The sad news about Lepanto? Many got whipsawed around the 0.42-0.43 price (For LCA). More on this one later.

Last night I saw the DOW trying to recover its losses from a hundred point loss. At some point it was down by only 60 points. Now, I checked and was shocked at the numbers. Down over 200 points or -1.69%. Terrible indeed.

On my own, I think that as long as the global economic growth story stays intact, Asia, albeit volatile in the coming days, will stay intact and manage to go up. The problem will largely depend on the US Consumer. Most of the news has still been about the subprime meltdown.

After the FED cut the rate by 50 basis points in September, the market reacted in what we may term as over exuberance. Imagine the DOW didn't just go to 14,000 in just one month last July. It managed to do that from January to July. Then in one month 1000 points was wiped out (August), then again, in one month, it was back right up to 14,000. I shudder to look at the charts right now.

Remember, although an uptrend is more sustaining than a downtrend, it has to be a slow, predictable rise. It shouldn't just skyrocket in a short time interval. It tends to pull back down hard. I think that's what is happening to the US Market, in technical terms. The good thing? If the DOW rebounds next week, we will know for certain if the direction of the charts lead us to bullish territory or bearish pits.

STOCK

Well, I was right with the quick profit taking on DIZON MINES (Ticker DIZ). However, I was wrong with the 3rd day run-up. After hitting 12.75, it closed down 1.00 at 11.75. Look to buy on weakness if you notice that JAP is continuing its buying of said stock.

I was right with AJO too. It opened at 0.155 and went to a high of 0.16. It went to a low of 0.15 but closed at 0.155. Continue on Monday? Probably, there are some people who bought at the recent highs and they have to average down to get out. Just remember that there's that DOW overhang.

Am I saying I'm good? No. What I am doing is sharing with you what I saw in the market. When you are viewing the ticker and the market (for a person with no interest in stocks, it's just a boring screen with numbers and letters) EVERY SINGLE DAY, you tend to build a sense of gut feel, and you tend to remember what the active stocks were and how they were playing out.

Since I wasn't able to see my Technistock, I won't be able to state my usual template of
stock, closing price, +/-% vs previous day's, top 2 buyers. Comments, if any.


PA 0.205 / -2.36 / Bad sign. They have a special stockholders' meeting next week if I'm not mistaken, and people are getting out? Makes me wonder. Let's see on Monday. It could be some people taking their profits on PA because they lost out on LC.

FGEN 61.00 / +0.83% / Breakout imminent? It's been stuck on that range but there's still buying interest. Keep an eye on this one.

STUCK

TBGI. Closed at 3.00 or flat from the 8th. Why am I highlighting this stock? Am I hyping? No. They made a disclosure this week right? That they have a private placement? Although buying interest has not picked up for this stock, whenever there's a private placement, it's a sign of something major. Watch out!

SUCK

The DOW, what else!

Oil!

The Dollar! It closed Php 42.670 to a dollar.

I have a serious problem with this. Remember, a large chunk of the Philippine economy is contributed by OFW inflows. If the peso further strengthens then we will have a problem with consumer spending this coming December.

The main reason why the local stock market picks up at the tail-end of every year is because consumer consumption is the strongest. It spurs the economy. Now if the same families that were receiving their remittances at Php50 to a dollar before suddenly lose Php 7 for every dollar sent back, that will have disastrous implications.

With this as a backdrop, I'm putting forward my contrarian foot and saying that 2008 might truly be the end of the bull run. My bold prediction is that after March, the market will either turn bearish or go into a major consolidation phase.

I am not an economist of course, that is why I don't intend to compute the numbers. For one, it's quite tedious, and second, I'm really not interested to compute. I don't like Math. I think that's why I chose Technical Analysis over Fundamental Analysis :-D

Lepanto A. I wanted to day trade this stock so I entered at 0.44. After I bought it at 0.44, the weakness started to show. It wouldn't budge 0.44. If you press F7 on Technistock you will see a chart. But it's only a good 6-8 months. My broker said that there was a resistance at 0.46. I opened my chart files, then whoala. Resistance is 0.46. That was why the stock couldn't go past 0.45 after it touched 0.46 intraday!

I had to have a strategy for my daytrade then. I told myself I would cutloss at 0.42, no matter what happened. There were moments of hesitation, and by jove, I really had a hard time deciding because at 0.42 it was still being bought up (that was around 10:30 in the morning). But eventually I stuck to my plan. I exited at a loss.

I wanted to buy back at 0.42 when I saw some strength. It did bounce back to 0.44, but eventually closed at 0.40.

Think about that, if I didn't cut my losses at 0.42, then I'd lose even more at 0.40. Not only that, I would panic even more with the DOW closing down again last night.

However, one thing I've learned is, if you want to CUT LOSS. Wait for the rebound. If I had cut loss at 0.44 then I would only lose in fees and commissions. At any rate, it could have gone the other way (i.e. what if it didn't rebound to 0.44 and actually just made a freefall to 0.40?).

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Let's look at the weekly chart of PSEi to see what will likely happen next week.

I won't attach technical indicators anymore as it will eat up the space for the price chart of PSEi. The RSI is going down. MACD seems to point to a short-term correction.




The picture quality is butt ugly and for malicious minds my diagram actually resembles a phallic symbol hehe. I didn't purposely make the diagram that way okay :-)

Anywho, next week is critical. If we fall to somwhere near 3,650 and lower, we will have a deep correction once again. Hopefully, anticipations of a BSP rate cut would push us to go sideways. At this juncture, I think I'd rather have a consolidation phase. The reason why there might be a correction, in my view, is that we are still near the top. With the RSI pointing to a bearish sign, there's chances of a correction. (Getting jitters).

Good luck to us all next week!