The Third Engineered Breakout of 7,400 in 3 Years!

Most haven’t realized that these are signs of a seismic buildup in stressors or a symptom of intensifying price instability. It’s either we’d be seeing a breakout above 7,400 or a plunge to 6,500 in the near horizon. Or we could even see both.

See Phisix 7,270: More Signs of Price Instability, JKSE-Phisix Correlations and the Global Reflation Trade March 26, 2017

The manipulators finally succeeded in their mission to break past the May 15, 2013 7,400 barrier.

It took them almost three months of rampant afternoon delight pumps and marking the closes to finally attain this goal.

Yet these actions have only magnified price volatility, as seen via the vertical prices, as well as create sharp divergences in price performances of issues comprising the PSEi 30 basket. Of course, such fragmentation has signified a function of the concentration and rotation of trading activities.

Yet what had been true then was equally true today. 

 

Though PSEi 30 issues were mostly up, the biggest gains accrued or gravitated to the 7 of the top 10.

In fact, 4 of the top 5 had gains of more than 1%.

Since the market cap weighting of the top 5 was 39.07%, with an average gain of 2.07%, 7,400 was in the bag—especially after Monday’s setup.

The idea of pumping the index beyond 7,400 has not only been to boost the headline index but also to generate a ‘herding effect’ where the greater fools join in the stampede!

Today’s breakout comes with outstanding volatility!

19 firms or 63% of the PSEi basket had price changes of 1% and more, 9 issues or 30% had 2% and more and 2 issues had over 3%.

All told, to hit 7,400 required systematic vertical pumping mainly in index sensitive issues while the others were levitated as a manifestation of the herding effect syndrome.

The roots of 7,400 (or exactly 7,392) was in May 15, 2013.

Two breakouts from 7,400 preceded today’s action. The dates: January 14, 2015, and May 13, 2016. Both raced to 8,100, then crashed to bear market levels.

I call this the jumping rope with 7,400 as the pivot point.

Now we seem back to the third cycle.

Because many follow charts, breakouts are important. Breakouts ride on the tailwind of momentum. And this has been one of the objectives which manipulators have targeted.

 

Technically speaking, breakouts must be accompanied by extraordinary volume to signify power and resilience.

At Php 11.941 billion, today’s peso volume was 7.47% less than 2016’s Php 12.9 billion and 11.22% smaller than 2015’s Php 13.45 billion. The gist: diminishing returns in volume.

But such aggregates don’t reveal the entire picture. Today’s special block sales (courtesy of 2GO wherein SM bought 30% share of the firm) was a huge Php3.84 billion. In 2015 and 2016, special block sales were Php 23 million (only) and Php 566.1 million, respectively!

In short, net of special block sales, peso volume was ONLY a measly Php 8.104 billion!

Stunning smoke and mirrors!

I noted in the chart above that the top 20 most active issues which have all been PSEi, with the exception of Shell Philippines, was only Php 5.628 billion (see below pane). This tells us that the biggest 20 issues had trade volume accounting for 79% of the peso volume net of special block sales. 21% was covered by 11 PSEi and the broad markets.

And today’s breakout was helped by “foreign money”.

I am not sure if they really account for as genuine foreign money. They could be satellite/s of local firms overseas. At Php 4.08 billion of foreign buying, this signified the largest one day inflow since September 30 2016 (Php 3.86 billion)

Though 3 of the top 5 issues (SM, SMPH, JGS) had been bolstered by foreign buying, the net of the top 5 was a Php 43.3 million net selling.

This suggests that foreign buying was more about the special block sales. And this is where I suspect that special block sales could be about international satellite offices.

More factoids on the three 7,400 breakouts.

2016 had the largest one-day gain at 1.52%, today was next at 1.43% and 2015 was at 1.24%

Today and 2016 had almost equal bullish breadth (114 advancers 79 decliners; 112-78). In 2015 it was 97 to 87.

As previously noted, the thrust for the present breakout was via a few issues experiencing vertical price actions or forcing prices up.

Here are a few examples…

 

It has been a rotational vertical pumping for most of the top 10. For instance ALI, SMPH and BDO were recently pushed higher (the latter two forged a record) but these backed off. Then the focus went back to the above. Today they were higher in synchrony.

This hasn’t been a normal market. Instead, it has been a market that’s being forced up!

Yes, do enjoy the show!

Phisix 7,310: A Journey to the Bullmarket or Perdition?

Phisix 7,310: A Journey to the Bullmarket or Perdition?

A journey of a thousand steps, wrote philosopher Laozi in his Tao Te Ching, begins with a single step. A journey typically requires a destination. And the 'thousand steps' must have a direction which may or may not lead to the intended destination. In short, the journey represents an end with every step taken as means to reach this end.  

Randomness, for as a long as such signify voluntary choice of action/s, also represent an end.

This can be applied to the financial markets. Or even to the Philippine equity markets.

Applied to the PSE, the popular desired journey is for the continuity of the bullmarket.

I share that wish too.

But the means to this end matters. And that’s the difference.

That’s because the “destination” requires a careful assessment of the consummation of the series of steps or actions. Will present set of actions, quantitatively and qualitatively, lead to such sustainable outcome?

Let us put this in concrete examples

100% of Last Week’s Gains Courtesy of End Session Pumps!

The Phisix ended the week higher by 42.1 points or by .58% to 7,311.72. For the 1Q and year-to-date basis, returns have expanded to 6.89%. This is what is seen.

But there is the unseen or the ignored.

Yet it was another week where PUMPS (and dumps) dominated the closing bell.

The week characterized the unanimity of closing PUMPs. Or, there were NO end session dumps. Though most of them occurred in the first half of the week, the cumulative number of closing PUMPS which is at 56.02 points accounted for .77% of the previous week’s close!

With pumps contributing 56.02 points (.77%), which is higher than the official 42.1 points (.58%), this demonstrates that over 100% of the week’s returns had been due to end session activities! Or seen from another angle, if these pumps were omitted, the Phisix would have closed slightly down (-13.92 points or -.19%)!

The short of this is: last week’s gains had entirely been artificial. Fake numbers, ergo phony returns. So just how would, the much hoped for bullmarket be soundly sustained if prices are artificial?

And even in days where activities at the PSEi seemed quite refreshingly normal, marked by minimal marking the close, furious pumps and dumps merely neutralized one another behind the scenes!

There has been little realization that these price fixing actions, has meaningfully contributed to violent price actions or price instability

Concentration of Trading Activities and Huge Disparity in Price Performances

Internal market activities clearly demonstrate of the ongoing price instability.

SM’s stunning (+4.65%) surge combined by subsidiary SMPH’s (+1.07%) jump this week essentially weightlifted the Phisix to its closing positive numbers. With a combined 18.16% share of the PSEi 30’s free float market cap (as of March 31), both issues signify as the two largest listed firms.

Peso volume for both issues at Php 4.17 billion accounted for 9.16% of the market’s aggregate turnover. Yet last week’s peso volume was inflated by special block sales at Php 10.251 billion or 22.54% of the total. This entails that outside special block sales, volume of two issues would easily exceed 10% of total trades

As a side note, SM and SMPH posted foreign buying which accounted for 40% and 21% of their respective turnovers.

Meanwhile, the sharp gains by some in the latter half of PSEi 30’s top 15 (upper left window) were merely counteracted by losses in the rest of the market (upper right window).

For the week, in the context of the PSEi basket, decliners edged out advancers 15 to 13 with 2 issues unchanged. So the asymmetry of price changes which favored the heavyweights decided the final outcome. End session pumpsabetted on such dynamic.

With SM near a new record, oddly, only three Sy-owned issues have etched fresh record levels in 2017 even when the PSEi has yet to transcend May 2013’s high at 7,400!

Even more, the Phisix, which has traded in the bandwidth of 7,100-7,400 for the over two months, had primarily been the result of the sustained rotational pumping in the Sy group of companies.

While others have recently joined the Sy group mostly issues within the top 10, e.g. AC, JGS, BPI, ALI and ICT, the glaring deviance in the performance of some of the elite firms relative to the rest of the PSEi component issues has caused the concurrent extended trading range.

This shows not only of the stark division in price performance between the biggest heavyweights and the rest but also the concentration of trading activities to the biggest, mostly index sensitive issues.

Sustained Price Instability

And such fixation on big cap index issues combined with the gaming of the index continues to fuel violent price actions.

Take SM. Since the one-day 9.24% crash last March 10, SM has soared 16.36% in just 15 days (as of March 31) or 1.09% a day! That’s a vertiginous vertical ascent! And SM is just off 1.9% from its record close at Php 710.5 attained last January 25.

Pumps and dumps were not limited to mark on close orders but likewise to intraday activities.

For the week, 7 issues or 23% of the PSEi 30 basket closed over 3% (plus or minus).  To pare down to 2% (plus or minus), there were 12 issues or 40%. At 1%, 19 issues or 63.33%. (see lower left window). Such showcases the excesses in price movements.

And while Sy owned companies have been flirting with new records, and where others have joined them, prices of several companies slumped back to their December 2016 levels or have drifted in proximity to such levels, e.g. GTCAP, JFC, MPI, MEG, DMC, AP, AGI, FGEN, RLC and PCOR (the latter has broken the December 2016 lows).

Price volatility and divergences can be seen in the week’s sectoral performance where price gains of four mainstream sectors were significantly pruned by heavy losses in the property sector (lower right window)

Hence, the upside thrust by a select few has been countered by selling pressures in the others. Or, the bidirectional violent price activities in many component issues has had an offsetting effect to result to a rather tamed or rangebound PSEi.

This implies that for an upside breakout of the index to come to fruition, such requires the participation of the broader PSEi.

Otherwise, if the heavyweights get afflicted by fatigue from the vertical brutal price actions, then they are likely to be pulled down by the latter group. And such which would likely entail of a breakdown of the 7,100.

Taken together, the gaming of the system, artificial or distorted prices, trade concentration, price instability/violent price episodes and diametric performances, would hardly lead to a salutary bullmarket.

Instead, the more measures are undertaken to artificially inflate the index, the greater the accretion of imbalances, thus the larger risks of a systemic blow up.