Sept 21, 2011- A Little Common Cents Corner- Mixed Bag, Questionable Rallies

Below are merely approximations of my thoughts in the markets.  Interpretation of information is always subjective and biased. 

Points to Highlight In Today’s Markets:

1.) Lack of Volume – I’m not sure if I’m the only one to notice the relative lack of average traded value in today’s Philippine Markets.   Trading is dormant and asleep. Let me try to show you how we have been faring recently compared to the past few weeks.  Our traded value recently has halved from recent averages of over 5-6 Bil worth to a paltry 3-4 Bil pesos worth these days.  There were only 2.4 and 2.99 Bil pesos value traded worth during the Miss Universe Pageant (Sept 13) and last Monday (Sept. 19).

Reference: Philippine Stock Exchange

Researched Data Period: August 22 to Sept.20, 2011

I’m a short term trader, so I only checked one month worth of daily data.  (I manually typed this through quotation reports given by the PSE. They don’t have excel formats yet.)

2.) Rising Wedges and Bearish Flags Accompanied by Breakdowns

The chart is courtesy of Joe the Upside Trader.  We are facing multiple resistances , a rising wedge which has a lot of bearish implications.  Perhaps this is one of the reasons why the relative sentiment of most traders are bearish, with volume trading very light.

A rising wedge is created whenever short positions are  being squeezed, which is the “buying support” the market has been experiencing in the low volume rally of the past few sessions.

Check your big blue chips in the Philippine Markets.  I know the stocks are “cheaper” today than a few months ago, but all these charts are “Yuck!” technically.  If the fundamentals are compelling, then I’d wait for better entry points.  MBT, ICT,ALI, SM,SMPH,BDO – yuck charts.

Big Yuck Chart – SMPH, PCOMP is an expansion breakdown chart.  I can go on and on, but what will that do right?

3.) Lack of Volume = Directionless trading, Lack of Conviction, Indecision.  

The uptrend of the Philippine market, as well as most markets has stalled.  This has been going on for more than a month already.

These general rules date back to the work of H. M. Gartley in 1935

1.) When prices are rising – Volume increasing is impressive, volume decreasing is questionable.

2.) When prices are declining – Volume increasing is impressive, volume decreasing is questionable.

3.) When price advance halts with a high volume, it’s potentially a top.

4.) When price decline halts with high volume, it’s potentially a bottom.

In other words, higher volume is usually necessary in an advance because this demonstrates active and aggressive interest in owning the stock.  Prices decline because of a lack of interest, and thus potential buyers, resulting in relatively light volume.

4.) Silver Linings- Market Dislocations Present Opportunities- Outperformance is possible (Wait and See- the Wiser Path) 

As Market Wizard Larry Hite once observed, everyone he ever met who believed in efficient markets was poor. The poor eggheads argue, miraculously, that markets have some mysterious source of efficiency, unknown in source or sustenance, that prevents outperformance from being possible, even for the alpha dogs supposedly dominating markets in the first place!

This line of thought deserves outright scorn and ridicule, and perhaps a sense of wonder at the sheer pigheadedness of the assertion. (Man as consistently rational utility maximizer? No. Talent equally distributed? No. Information objectively interpreted? No. As Yale professor Robert J. Shiller has observed, the efficient market hypothesis is “one of the most remarkable errors in the history of economic thought.”) – Stanley Druckenmiller

Hat tip to Mercenary Trader for this wonderful article: “4 Lessons from Stanley Druckenmiller”.  Read it.

Conclusions:

The failure of the volume to confirm any upward trend (even the short term trends) is a warning that the stock trend is no longer healthy and that a longer-term downward reversal is likely.

A combination of “top down,” “bottom up” and “price action” is my personal “Holy Grail” in making a trade or an investment, and allocating exposure in the markets.  If I’m terribly light in the markets, its because nothing really is quite compelling (and perhaps, yes that’s a reason to partially enter), but do your own research.  With bearish gloomy flags, and no sign of capitulation in the Philippine markets, this doldrum is a time to just listen to Mr. Jesse Livermore.

There’s a time to go long, there’s a time to go short, and a time to go fishing.

– Faceless Trader is catching up on readings, readings and readings.

Here’s a nice ambigram tatoo.  Art and Science is merely a philosophy 😀  Reminds me about the markets.

This Brian Viveros painting also looks so nice right?  That’s the featured image. 😀

Check out for more here.

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About Abc

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5 Responses to Sept 21, 2011- A Little Common Cents Corner- Mixed Bag, Questionable Rallies

  1. JL says:

    FT … may i repost in FM?

    Like

  2. Awesome post boss! And the tattoo too!

    Like

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