Outside: The stock market: a return of the bull?

The stock market: A return of the bull?

A reasonable argument could be made that the Philippine Stock Exchange (PSE) is ready to return to pursuing the bull market rally. Macro economic conditions first: Very low inflation, very low interest rates, very high liquidity as evidenced by the money supply, increasing business activity. Micro market conditions: everyone who wanted to sell has done so, individual share prices have gone down to mid-December 2006 levels, selling pressure has created an oversold situation, individual earning reports are strong. Yesterday's trading activity: prices opened higher and stayed high all day, minor selling from 116 points up to a close of plus 92 points only the result of day trader profiting, volume numbers were large but did not indicate wild exuberance, moved well above the 3,000 support level. It was inevitable that the market should have gone up yesterday after a local, prominent stockbroker said that he felt no one should be investing in the market as the index would or could fall to 2,000. That kind of gloom and doom deserves buying shares just to prove him wrong. Nonetheless, I am not ready to jump into the market with both feet, or both bank accounts because, basically, I am an investment coward. So what would it take to bring me in? Regardless of what happens today or even over the next few trading sessions, technical confirmation of renewed upward momentum will come when the market penetrates and holds above the 3,200. However, that is not what I am particularly interested in seeing, for me to call the rally alive and well. Unless we see a bloodbath from a move below 2,800 (which is now highly unlikely), the market is pointing up. The question is, from a profit standpoint, will the market stay boring and flat above 3,000 or start rallying in earnest? Only if we are headed to break above the high of 3,400 I will be interested in putting my money on the table. Over the next week or so, I will not be concerned about any down days as long as two conditions are met. First, we must stay above 2,800 as mentioned above, and secondly, down volumes are small. Normally, we would want down volumes to be large as this is a very important indication that sellers are running, scared to death, for the sidelines. In this case, the heavy volume on the downside has already occurred over the last week. So downward price movement, as long as it is reasonable, should not be where our focus should be turned. It is the up days that are important. From an investor's viewpoint, a flat, stagnant and boring market is almost as bad as a down market. What we want is some good action and strength to the upside. Otherwise, might as well buy lotto tickets. A 3,200 on the PSEi would be nice to see but the next couple of weeks will include some critical up days. This is what we want. We need to see increasing volume as the market moves higher. If yesterday's volume had been P5 billion or P6 billion, I would dismiss it as a knee-jerk reaction to improvement on the world exchanges. I want to see more days like yesterday even with substantially lower price increase. We need to see a steady flow of money back into shares, and steady means moderate volume. Slower volume will also mean that the hot-money speculators are still on the sidelines, making for a better short-term outlook for prices. Let the high-rolling speculators come in later to give us a boost toward and beyond 3,400. "On-Balance-Volume" is an indicator that measures the volume on "up" days minus the volume on "down" days. From today onwards, I need to see "OBV" becoming more positive. Plenty of damage has been done to the market in the last week and a slow but strengthening recovery of both prices and volume is important. OBV will give us an indication of that. Finally, the best indication that the market is back on track is if the PSE goes contrary to any remaining downward pressure in the global markets. The reaction that the PSE had to the global massacre, while making a little sense, is completely unjustified from any fundamental viewpoint. Now we wait and watch.   http://www.businessmirror.com.ph/03082007/opinion02.html