1st half technical outlook -...
TRANSCRIPT
1ST HALF TECHNICAL OUTLOOK
OUTLOOK OVERVIEW
• World Markets Dive into medium term Down Trends
• Some of which threaten to rub in a Bearish-like Phase
• Such down trends may need a Selling Capitulation or Reversal Pattern to blow itself out
• This requires Patience, Prudence and timely Positioning to reign in the Opportunity this Price Crisis brings on
2
GLOBAL TECHNICALITIES
PSEi -9.9%
SP500 -9.0%
MS WORLD -11.7%
MS EMF - 12.7%
CHINA -15.8%
PSEi vs SP500, DMs, EMs & CHINA (YTD)• Global markets open the Year with a downward bang
• China has led the global decline losing over 15%
• The selling rout has infected both Developed and Emerging markets
• The Philippines has had its share of a decline
• …but it is clear the drop is not endemic to the Philippines and may require global maneuverings (stimulus efforts) to resolve
Markets Proceed to Slide in 2016
What happened? China, Devals, Rates, Oil
Shanghai Index
China has fallen over 40% from its high in June 2015; has recently passed below 2015’s lowest close
Chinese Yuan
The Chinese Yuan still shows a devaluating trend but did hit overbought levels (needs to adjust)
Overbought
(S1) 2,850
(S2) 2,420
US I-Rates Vs Dow Jones IA
What happened? China, Devals, Rates, Oil
(S1) 15,470
(S2) 14,800
• Historically when US Rates begin to rise, the Dow Jones usually shows negative response into the short-medium term
• Since 1987, 3 of the 4 rate hikes incited a transitory lull (1-Yr) in prices then saw a continued advance; it only differed in 2000
• The Dow Jones has already broken beneath its 7-yr Up Trendline; next support at 15,740 then 14,800
• The Sp500 and Nasdaq have not yet broken their Up Trendlines… but such major support tests near
Sp500 has corrected dangerously close to its 7-yr Up Trendline Support [1,840 followed by 1,750-1,570]
SP500
(S1) 1,840
(S2) 1,750
What happened? China, Devals, Rates, Oil
The Dollar (Index) upholds its upward bias aided by I-Rates rebounding –track support (98.15 / 96.60 )
US Dollar Index
What happened? China, Devals, Rates, Oil
Oil prices remain into a down trend and now fall below $30; tags price areas last seen in 2004-2003
NY Crude Oil
(S1) 24.70
(S2) 18.30
OPEC & World Oil Supply
• Oil production remains high despite drop in Oil price
• Higher volumes are the only way to drive revenues at lower energy prices
• Storage for Oil inventories running tight
• Low prices hurt Oil export business & raises their credit risk
What makes a Bear?CURRENT* 2015 HIGH % DROP
US (SP500) 1,859 2,130 -12.72%
Malaysia 1,618 1,867 -13.34%
India 24,062 28,593 -15.85%
Australia 4,896 5,954 -17.77%
Indonesia 4,479 5,500 -18.56%
Japan 16,416 20,841 -21.23%
Thailand 1,248 1,615 -22.72%
Philippines 6,259 8,127 -22.99%
Germany 9,391 12,374 -24.11%
Singapore 2,559 3,539 -27.69%
Hong Kong 18,886 28,433 -33.58%
China 2,976 5,166 -42.39%
[ B e
a r i s
h Z
o n
e ]
“A downturn of 20% or more in
multiple broad market indexes…,
over at least a two-month period,
is considered an entry into a bear
market”.
% Drop from its 2015 High
Effect: Heavy Corrections with Bearish Tones
* Closing data as of Jan 20, 2015
[ ]
[ ][ x ]
Validations:
• 20% Drop
• Broad Market
• > 2-Months
PHILIPPINE TECHNICALITIES
The Philippine main line Indices have fallen below the 20% bearish threshold… but extreme declines may soon need counter rallies
Index Current* 2015 Top % Drop >2-Months Weekly RSI**PSEi 6,259.0 8,127.0 -22.99% No 26.4%
All Share 3,605.0 4,635.0 -22.22% No 24.3%
Holdings 5,917.0 7,265.0 -18.55% No 28.5%
Comm/Ind 10,241.0 13,068.0 -21.63% No 30.6%
Financials 1,458.0 1,888.0 -22.78% No 29.6%
Property 2,440.0 3,307.0 -26.22% No 26.3%
Services 1,381.0 2,245.0 -38.49% Yes 23.4%
Mining/Oil 8,853.0 16,908.0 -47.64% Yes 19.7%
* As of Jan 21, 2016
**Note: Weekly RSI values below 30% are Oversold; values lower than 27%-25% are grossly Oversold and usually cause noteworthy rallies soon thereafter
The Philippine Scene
X
[ S
ub
–In
dic
es ]
[ M
ain
]
Philippine PSEi and Peso
The PSEi remains on a down shift after breaking below its 6,600 support, but is now Oversold and needs to break over its 8-day MA to rally well
Philippine Stock Exchange Index
6,600
Philippine Peso
48.20
* As of Jan 21, 2016
The Peso is now channeling up, now closer to range highs of 48.20 (R). Support is seen at 47.00-46.90
5,890
(S1) 5,890
(S2) 5,700
5,700
(S1) 5,890
(S2) 5,700
Mapping the PSEi on the Elliot Wave
Wave Track:• 5th wave of a Bearish
“A” wave
• “B” wave recovery should
come next (major rally)
• Followed by a “C” Bullish Bearish
What does a “B” wave look like?
(R1) 6,600-6,700
(R2) 7,000-7,400
Basing Pattern
or ‘V’-Shape
A
B
“B” Wave:• Must first establish a
base
• Usually by a basing
pattern (double base or
higher-low) or V-Shape
drive
• Possible rally towards
6,600-6,700; hopefully it
widens to 7,000-7,400
Double Low Higher Low
V-Shape
C
• Assumptions:• We are in a Down Trend
• But we are nearing the end of the first part of the down trend [A-wave]• Weekly RSI reads (below 30% or 27%) may attest to this
• Major price targets (of support) are very close
• Prices will soon ride into a major (but temporary) recovery [B-wave]
• How to capitalize on the Price Crisis:• Enter on a selling extreme and look to sell into a viable rally to resistance
• Resistance may be targeted by using 16 to 32-day Moving Averages
• You may have to be quick – as counter trend trading requires good sense and speed
• Prepare to look out for a Reversal Pattern or V-Shape• Better to spot and enter these, rather than guess a low
• Do this preferably on quality issues (your time to buy them at a steal)
Trading Strategy
Signals:• Look for oversold conditions in good
quality stocks (pref ‘Big Blues’, 1st
liners or good solid names)
• Daily RSI reads should be deeply oversold ( < 25% or less)
• Weekly RSI reads should be close to or under 30%
• Keep watch for (bullish) Divergences (can override weekly RSI requirement)
• Price spreads to their 8-day or 16-day Moving Average are far
How to Spot Selling ExtremesUniversal Robina (URC)
URC 173.60 (Jan 11,2016)
Daily RSI 23% / 29%
Weekly RSI 39% / 45%
Divergence Possible (Yes)
8-Day /16-Day MA 182 / 182.60
How to Spot Selling ExtremesAyala Land Inc (ALI)
ALI 27.65
Daily RSI 25%
Weekly RSI 30%
Divergence No
8-Day /16-Day MA 29.35 / 30.90
JG Summit (JGS)
JGS 58.25
Daily RSI 28%
Weekly RSI 27%
Divergence No
8-Day /16-Day MA 61.92 / 65.15
Short term Basing Patterns & V-Shapes
Ayala Corporation (AC)
Oversold
Higher-Lows
V-Shape
Remember the Mission:
Trade / take advantage of short term rallies triggered by oversold conditions
Keep in mind that we are in a down trend… and we need to lighten into rallies to resistance
We do this until trends change
PSEi 30 Rundown on Oversold PotentialsStock Price Daily RSI Weekly RSI 8-day MA % Diff 16-day MA % Diff 32-Day MA % Diff
AC 600 19.7 29.21 647.12 7.85% 686.68 14.45% 714.26 19.04%
AEV 54.4 39.36 40.83 55.55 2.11% 56.24 3.38% 56.56 3.97%
AGI 12.7 19.1 25.14 14.17 11.57% 14.96 17.80% 15.72 23.78%
ALI 27.2 21.89 32.2 29.65 9.01% 31.33 15.18% 33.07 21.58%
AP 40.05 45.43 42.14 40.2 0.37% 40.68 1.57% 40.46 1.02%
BDO 94.4 34.53 38.66 96.43 2.15% 99.16 5.04% 100.43 6.39%
BLOOM 3.11 21.76 27.77 3.21 3.22% 3.64 17.04% 4.16 33.76%
BPI 84.1 51.65 44.96 84.5 0.48% 83.55 -0.65% 83.42 -0.81%
DMC 10.9 28.82 31.47 11.72 7.52% 12.42 13.94% 12.97 18.99%
EDC 5.4 37.92 37.37 5.57 3.15% 5.75 6.48% 5.89 9.07%
EMP 7 16.35 29.61 7.97 13.86% 8.41 20.14% 8.71 24.43%
FGEN 18.24 21.39 31.81 19.25 5.54% 20.55 12.66% 21.82 19.63%
GLO 1687 32.5 29.01 1692 0.30% 1746 3.50% 1818 7.77%
GTCAP 1235 35.83 42.97 1281 3.72% 1307 5.83% 1288 4.29%
ICT 55 19.91 20.75 57.9 5.27% 62.04 12.80% 66.21 20.38%
JFC 195 37.82 45.32 200.8 2.97% 205.5 5.38% 207.6 6.46%
JGS 56.9 23.17 28.38 62.66 10.12% 66.08 16.13% 68.76 20.84%
LTG 14.3 49.15 55.22 14.3 0.00% 14.46 1.12% 14.74 3.08%
MBT 68.1 30.47 28.46 70.3 3.23% 73.71 8.24% 76.62 12.51%
MEG 3.1 24.32 27.31 3.51 13.23% 3.77 21.61% 4.07 31.29%
MER 301.6 39.67 49.29 308.02 2.13% 311.16 3.17% 313.6 3.98%
MPI 5.18 48.72 55.02 5.16 -0.39% 5.18 0.00% 5.2 0.39%
PCOR 5.36 15.26 28.42 5.64 5.22% 6.16 14.93% 6.65 24.07%
RLC 23.1 31.43 31.85 23.91 3.51% 25 8.23% 26.16 13.25%
SCC 120 25.65 33.64 125.16 4.30% 129.18 7.65% 132.02 10.02%
SM 740 30.44 29.5 788.5 6.55% 809.75 9.43% 826.23 11.65%
SMC 60 83.2 62.81 58.9 -1.83% 55.04 -8.27% 50.91 -15.15%
SMPH 18.84 34.7 40.02 19.64 4.25% 20.33 7.91% 21.1 12.00%
TEL 1940 41.91 37.6 1918 -1.13% 1961 1.08% 2014 3.81%
URC 179.5 43.46 42.27 182.3 1.56% 182.47 1.65% 183.08 1.99%
LEGEND:
Oversold
% Diff > 5%
% Diff > 10%
Worthy Pick
• Global markets have shown heavy declines• Expect choppiness and volatility to continue
• But oversold prices may soon offer up some recoveries
• Heavyset declines may also entice govt’s to ‘stimulate’ a rebound
• The Philippines has suffered a bearish decline• A pullback close to 6,000 is getting near to major support 5,890-5,700
• We could be at the verge ending the “A”-Wave (Elliot)
• And this may soon trigger into a wider recovery “B”-Wave
• Take advantage of extreme / emotional selloffs• Even declines need to fall at controlled speeds
• A wider rally will surface; offer recoveries close to resistance 6,600-6,700
• But remember that the major trend still points down• Sell into rallies and then wait for down trends to turn
SUMMARY:
Good Luck!
JUAN G. BARREDOCHIEF TECHNICAL [email protected]
{Miss EIP} “If you expect to continue to purchase stocks throughout your life, you should welcome price declines as a way to add stocks more cheaply to your portfolio.” W. Buffet
Ms. EIP
“Volatility is greatest at turning points, diminishing as a new trend becomes established.” G. Soros
Mr. Trader
“Time is your friend,
impulse is you enemy.” J. Bogle
Sgt Shake Out
{Miss EIP} “I've found that when the market's going down and you buy funds wisely, at some point in the future you will be happy. P. Lynch
Femme Fund