Tuesday, April 7, 2009

Bear Market Rally or Recovery

PSEi closed at 2,049.46 a five month high since October of 2008. The DOW breached 8,000 last week and the support is now at around 7,700 - 8,000. The question to speculators now; is this the start of the economic recovery?

George Soros does not think so.
The rally is just a ‘Bear-Market Rally’.

Another theory is that, the rally is caused by traders covering their short position. A lot of these traders are expecting another down turn in stock prices, that is why they're buying on margin now.

But why care about the world economy, when we're trading in the Philippine Stock Market? Well, we should care since only a few local investors or traders trade in PSE. As told by a stock broker friend, a month's transaction traded in the PSE is just a day trade in NYSE. Also, I think that the stock prices on the PSE are driven by foreign investors.

My theory, since gold is on a constant decline (forget about gold to reach 2,000 per ounce), currently at $883.60, means that investors and traders are unloading their gold and moving it elsewhere, just like what happened to oil prices. Bond on the other hand, is not a good investment right now, since the interest rates are low. Once the interest rates move higher, the Par value of the bond goes down. Thus, you'll not make any unless you wait for maturity. So the only option left is either put your money on the bank or trade in stocks.

Bull Market? I asked my friends in IT recruitment about the US job demands. The answers are the same, still low compared to last year. However, jobs are lag indicators; thus, it does not really help. So there's no bull market yet. Recovery? Maybe.

Despite all these speculations, comments, theories and rumors, I'm still putting my money on two heavy weight stocks.

Ayala Corporation (AC)
P/E Ratio: 5.66
Current Price: 214.00

SM Investments Corporation (SM)
P/E Ratio: 10.42
Current Price: 205.00

2 comments:

Abby Lim said...

Hi,

Here's my TA on AC and SM

(1) AC chart shows a recent formation of ascending triangle which is a bullish pattern. Right now, it need to break the resistance @226.50 with volume. If this happen, the target price will be @ 254.50.

(2) SM chart shows an upward channel.

Anyway, goodluck on your trading. Cheers!

jhesqi - do online trading said...

I believe the stock market is still in recovery. A few more months and we might have a rally.

Nice site by the way. Visit my site if you have some time. You can message me there if you want to exchange links since we have similar topics. Thanks.