Looks Familiar Charts; The Historic Price Pattern-Stock Market Cycle Progression

Pattern and cycles as defined by Merriam Webster:

Pattern: the regular and repeated way in which something happens or is done

Cycle: a set of events or actions that happen again and again in the same order : a repeating series of events or actions

The following charts of select PSEi 30 issues reveals of a “look familiar” traits with the past.

Question is; which chart of the past has resembled its current price actions?

Stated differently, AEV today looks a lot like which chart of the past?

Well, peculiarly, AEV's current price actions reverberate with BW in 1999!

How about SMPH and MPI?

Drumroll pls….

Tada!!! It’s South Seas-Philweb in 2000!

Let us go back to the definition of pattern and cycles. 

Since patterns signify as “repeated way in which something happens or is done”, then this means that such circumstances represent as ex-post observations. Or patterns can only be identified after the fact.

On the other hand, since cycles constitute a “set of events or actions that happen again and again in the same order” therefore it is an ex ante phenomenon. Said differently, cycles are based on anticipatory or expected repetition of events that leads to iterative outcomes

The above charts have been indicative of an unfolding path of patterns progressing as various stages of the stock market cycle.

While a cycle may not be repeated in exactitude, they are manifestations of the extant or incumbent structural and internal dynamics that has powered its present status. It is not just form but substance.

It is easy to deny the above by saying AEV, SMPH and MPI are not the same as BW and SSO. But such an objection would represent a red herring. The issue is PRICE ACTION or PRICE BEHAVIOUR.  The unfolding price actions have been suggestive of a cycle, underpinned by market psychology, that has resembled or reverberated with SSO and BW.

The boom phase of all bubbles will always be rationalized. Even the initial bubble bust episode will be vehemently denied…as today.

That’s because most people, even those garbed with MBAs or PhDs, not only think with their eyes, but they have vested interest in the boom. Thus they will fight with all means, including employment of deception or even manipulation, to maintain the status quo.

As example, why do you think 5 biggest investment banks (Lehman, Goldman, Salomon Bros, Merrill Lynch and Morgan Stanley) in the US vanished during the Great Recession? Were their armies of analysts, economists, statisticians and econometricians, accountants, lawyers and etc… been able to anticipate the event? Or as consensus, were they merely been blind to risks? Or did they deny the risk because it would hurt their business models?

The difference has been that BW and SSO occurred in a span of less than a year. These are specific stock bubbles that happened during the post Asian crisis phase. Or these specific stock market bubbles coincided with the PSE’s bear market.

Ironically, we are witnessing a historic moment unfold…right here, right now.

Since present price actions by essentially most of the top 15 PSEi 30 issues have assimilated BW and SSO price momentum dynamics, then this means that almost the entire PSE have been and will be gripped and plagued by the developing treacherous price fluctuations from embedded imbalances.

Here is what to expect. If momentum picks up, in the same way as BW and SSO, then there should be a TERMINAL blowoff phase. Stock prices (by many firms) will contemporaneously spike by even a larger proportion than today, over the next two-three weeks. And this means 8,127.48 will be taken down. The PSE will have a shindig.

But as BW and SSO patterns reveal, the sharp upside movements of the FINAL vertical stage would redound to or will be followed by an equally sharp downside. The vertical ramp will be erased. Greed will morph into Fear. And fear will strike into very hearts of the market participants.

"Fundamentals" will emerge to rationalize such price action.

Consolidation happens after the bloodbath. Then the next leg down will begin. The incremental downdraft will proceed.

And if history will rhyme, Newton’s law will most likely prevail.

Of course, that’s if the BW and SSO cycles will repeat.

But as you know, we have been told that “this time is different”.