Wow
that was quick.The
Phisix crashed 4.37% today just when my ink has hardly dried. I wrote last night that grizzly bears would be the story for 2016.
Beyond
my expectations, sellers had apparently been in a frenzied rush out of
the Philippine equities today. Sellers frantically smashed into the
ramparts that bordered the bears and bulls to lead them straight into
the bear’s lairs.
At
least during the August 24 crash, price fixers had the temerity to
mitigate the 7+% intraday losses to only 6.7% at the close, through end session
pump.
While
today’s crash was much less than August 24, price fixers had
seemingly been absent or even perhaps joined the dumping session.
There was even a mini “marking the closing” today. But instead of a pump it was a dump that amplified the losses
for the day! (intraday chart and quote from Bloomberg) Karma?
Remember
that the Phisix plummeted 5.42% last week. So today’s tailspin PLUS
last week’s losses adds up to a shocking 9.79% loss in just SIX
days of trade for the year 2016!!!
And
instead of the best among ASEAN equities, the Phisix was the worst performer
with last week’s 5.24% slump
What
a foreboding start!!!
But
why or what’s the hurry to sell? Has the domestic market suddenly unearthed something so
distressing, which media and the establishment has concealed, as to
incite such violent reaction?
Has
the market come to realize that the PSEi 8,127.48 was a Potemkim
Village?
I
understand that the mainstream will pin the blame on external factors
for today’s bloodbath.
While
it may be true that most of Asia was in the red today, the Reuters
quote above reveals that only the Shanghai index, with another 5.29% crash,
topped the Phisix in scale. All the rest suffered losses below 3%.
In short, there has been more than meets the eye. There must be a significant domestic influence for today's violent reaction.
Sellers
were so fixated on exiting that all indices were bloodied.
Decliners
trounced advancers by a stunning 8 to 1!!! (my guess is that this margin represents a record of sorts)
Most of the
heavyweights, the headline index sensitive issues, had been massacred.
Today’s
breakdown totaled 22.63% from the April 10 2015 high. Clearly a bear
market.
For
those who may argue that this may look like 2013, pls note of the
difference.
The
5,700+ levels served as a bottom which was hit thrice in 2013. It was a springboard for the 2014 run.
Today
was a complete breakdown!
During
the last August crash, I noted that crashes
have not been an isolated event
Additionally, Monday’s
crash hasn’t been an anomaly.
Crashes are signs of the ventilation of embedded imbalances. There
won’t be crashes without justification on them.
There
have been many developing signs that hinted to this eventuality.
The
market’s shrinking liquidity as expressed by the diminishing Peso
volume, increased deterioration of market breadth and reduced stock
market trading activities had all converge to presage this. I warned:
The
lesson: In
bullmarkets watch the “bid”, in bear markets watch the “ask”.
The conditions underlying the bids or asks—which represents the
investor risk preferences—will determine the direction of momentum.
Remember, the long term represents the sum of short actions.
As an old saw goes, the journey to a thousand miles begins with a
single step (Laozi). Applied to Philippine stocks, once again, the
intensifying decline in the trading volume highlights heightened
clues of dissipating bids….
Said differently, buyers
at current price levels have been erecting less and less barriers
against mounting sellers.
And
all it takes was for a big headline issue to function as trigger.
The
reason why the Philippine assets remain relatively sturdy has been
because sellers
have NOT yet been aggressive since the HEADLINES tell them so.The
establishment believes that the boom can still be maintained even
when the core has been eroding.
They are relying on HOPE. And
this is the reason behind the headline management.They
manage statistics and the markets to keep intact what they see as
‘animal spirits’. The exposé on DBP’s wash sale should be a
wonderful example.
Besides,
headlines shows of no crunch time yet, here or overseas. But no one
can guarantee how long this endures.
But when
reality eventually filters into the headline;
perhaps as in the form of economic numbers or a surprise missed
interest payment by a major company, or the appearance of a major
global event risk, then bids will evaporate.
Bullseye!
Bullseye
Again!
Sure, there will be sharp rallies as characterized by a typical bear market.
But I suggest that given the escalating fear factor, any sucker's rallies should sold into.
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