From a technical perspective, the Phisix shown above seems to be drifting towards a crucial point, whose destiny will be shaped either by a major reversal or will constitute as a continuation of the current bullmarket.
That’s because the Phisix seems to be moving towards a transition into what has been popularly known as a ‘death cross’ pattern[1] where the long term moving averages could move to break above the short term averages that would imply of a major trend reversal whose trend bias will favor the bears.
But since charts represent as only a guidepost for me, which means that such instruments are not only infallible, but in fact are susceptible to statistical inconsistencies, it is important to emphasize that trends are not propelled mechanically by the patterns itself, but by people’s action.
From here we can say that the current trends demonstrated by the Phisix are manifestations of externally influenced price dynamics that likewise are reflective of the ongoing apprehensions from global political vacillations.
The actions of the Phisix seem congruent with the actions of her neighbors as shown earlier.
To repeat, even if there should be any downside thrust that could be manifested in the chart of the Phisix over the coming sessions, which may suggest of a bear market in motion, any major moves undertaken by global policymakers can or may undo such chart formations.
This would be similar to the much bruited ‘death cross’ formation of the US equity markets highlighted by the S&P 500 in 2010, which had been vanquished by Ben Bernanke’s announcement of QE 2.0[2].
Nonetheless the current oversold rebound by the Phsix signifies much of indecisiveness.
As the Phisix has bounced off its latest lows, the recent rebound has been accompanied by diminishing volume (as shown by the Peso volume averaged on a weekly basis)
The advance decline-spread computed on a weekly basis seem to have equally been damaged by the recent sell-offs.
Both variables above reveal a lot of tentativeness among market bulls.
The good news, so far, is that the current market carnage has mostly been a locally driven phenomenon as net foreign outflow has remained minimal.
The paucity of foreign outflow has kept the Peso from a substantial drop and has likewise buoyed current sentiments.
Bottom line: The current sentiment exhibits that there has been continued signs of uneasiness from both local and foreign participants who appear to have been revealingly traumatized by the recent bloodbath.
To see signs of improvement, we need a significant expansion of Peso volume trades, a broad based bullish or optimistic market breadth which should be supported by an improvement in chart price actions.
But most importantly, outside the local context, we need to see strong evidences of recoveries from our neighbors’ bourses, and similarly from the commodity markets.
Such recovery should likely be accompanied by signs of consolidation or parallel enhancements of the price actions in developed economy contemporaries.
Only from the above developments can we say that we have successfully sailed through the Greek mythological treacherous waters of Scylla and Charybdis[3].
[1] Investopedia.com, Death Cross
[2] See How Reliable is the S&P’s ‘Death Cross’ Pattern?, August 14, 2011
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