Miko's Blog for July 2010

I would like to thank the PSE for correcting the foreign buying/selling per stock on its daily quotation report last Thursday. Unfortunately, they have yet to upload the daily quotation report for Friday. Sorry Tsupiteros but I will not be able to update this website nor will I be able to write my newsletter without it (hayyy).

Plunge Protection Team (PPT) in the works last night on the Dow and even with our own PLDT. Obviously, they know their technicals and they know how critical those support levels are last night.

July is finally over and we are now entering the most bearish month of the calendar - August. Ghost month starts on Aug 10. I hope the markets can survive.

Song of the day - Spiderman, Spiderman, Friendly Neighborhood Spiderman (WEB). :-)

A lot of people are blaming the New Trading System for the condition of the market right now but what some people don't understand is that it isn't the system that is the problem, it's actually the state of the market. Even the smaller fluctuations is not a problem. Prices will trend when it wants to trend as what we saw in SLI (on the upside) or PNB (on the downside).

Here's a nice quote I heard from one of the analysts that was being interviewed in CNBC: "The market is not a bull nor a bear. It's just a turkey."

To the PSE - Please check the foreign buying/selling per stock in the daily quotation report. As of yesterday, the values are still erroneous. I have absolutely no idea which stocks have foreign buying or selling right now and I don't even know if the aggregate amounts on the whole market is correct.

I guess the whole market is now starting to get a hang of the New Trading System already as value turnover returned to normal and some are becoming aggressive already.

To the PSE - The foreign buying and selling per stock in the daily quotation report last Monday and yesterday were still erroneous.

To COL - The data for Monday from the broker information page is still erroneous.

After declaring a tender offer at P75, SMC has decided to offer shares at P75 once again....and I thought I was the only one who was selling at "same price" (haha).

PNB, on the other hand, has denied that it is for sale. I'm actually surprised that it's still trading at 41.40 up to now. Take note, a merger will not require that the stock trade above par. The drop in PNB has also given a reason to the holders of the other high-flying banks to finally take some money off the table.

I wonder what's up with FLI. Strong earnings maybe? Or, are they going into REIT perhaps?

Still more birth pains for the New Trading System today. Although most people are a lot more careful with their transactions this morning, I suspect that were still a lot of error trades today. I only learned this morning that the market was down by 2 points yesterday on around P1.6 billion value turnover.

I saw the PSE upload their daily quotation report this morning but, when I checked again afterlunch, it was gone. I guess they still needed to edit it for errors. I hope they can fix that as soon as possible as I cannot trade properly without that report, which I use to update my charts. Citiseconline, on the other hand, had most of their functions up and running already but their broker information pages are still filled with errors. A friend of mine also told me that, when she sold her securities, she could no longer use the cash to purchase another security.

One thing people don't realize is that the brokers are having a tough time right now because everybody is using a completely different software and to say that it's unuser-friendly is an understatement. Imagine, I couldn't even look for such simple information as the opening price of a stock. One of the bugs that I encountered this morning was that I only had 1 screen instead of the 5 screens that I should normally be able to access. If I wanted to access such simple information as the top gainers or top losers in a different screen, I wouldn't know how to do it cause it's not in the menu (arrggg). As an improvement from yesterday, I already know what the market did today. Unless that value was erroneous, the market was up by 20 points today. However, I still don't know what the value turnover was for the day.

Overall though, I think the New Trading System is fine but will still probably need a some tweaking. It would be great if the PSE could re-educate the brokers on the software's complex functionality. I know brokers like me ought to have learned and studied the software since months ago but, the thing is, I only realized what the real problems are when one gets to use the software in real-life trading. So far, I haven't had any problems in execution and data monitoring. My problem is more of how to access information in my software.

Doesn't this make you wonder of the similar errors we may have had in the last elections?

I guess everybody was quite culture-shocked by the New Trading System this morning. I pity all those brokers who had error trades at the opening like those who sold MER at 165.00 or those who sold SM at 357.50 or those who sold AMC at 10.00. I think the only person who was having fun this morning was Chucky. :-) It will probably take at least this whole week for the market to adjust to this new system. The broker information in Citiseconline is still missing right now, the daily stock quotes of the PSE hasn't been uploaded yet up to now, and, I don't even have any idea whether the PSEi was up or down and what its value turnover is for the day. I particularly love the pre-closing period as manipulators can no longer artificially make their stocks strong at the end of the day. This change is definitely a good thing. Although everybody hates change, I do believe that this change is for the better.

You may want to take note of the following changes in the board lots and fluctuations in the table below for tomorrow's start of the New Trading System:

Price
From	To	Tick Size	Lot Size
0.0001	0.0099	0.0001	1,000,000
0.0100	0.0490	0.0010	100,000
0.0500	0.2490	0.0010	10,000
0.2500	0.4950	0.0050	10,000
0.5000	9.9900	0.0100	100
10.0000	19.9800	0.0200	100
20.0000	49.9500	0.0500	100
50.0000	99.9500	0.0500	10
100.0000	199.9000	0.1000	10
200.0000	499.9800	0.2000	10
500.0000	999.5000	0.5000	10
1000.0000	1999.0000	1.0000	5
2000.0000	4998.0000	2.0000	5
5000.0000	Up	5.0000	5

Expect volume and volatility to decrease significantly by tomorrow as everybody tries to get a feel for the New Trading System. Day-traders and Tsupiteros will most likely be absent. I'm not sure if the new types of orders like "Iceberg", "Fill and Kill", "Sliding Validity" and Stop loss orders will already be effected by tomorrow. Do check with your broker. Another thing that will be new with everybody will be the "pre-closing" period at 11:57 p.m. Hopefully, with these new feature, force closings will now be a thing of the past. Lastly, be patient with your broker as he will most likely be very, very slow in executing your order by tomorrow in order not to make any mistakes. I'm guessing, the whole market will probably need one week to adjust to this new platform.

The highlight of the day was APX/APXB as news came out yesterday that the company had struck Gold at its Maco Mine in Compostela Valley. I would like to congratulate Mr. KingsPower on this one. I hardly know anyone who is as patient as you. The buyers of the B shares this morning have a lot to smile about right now as they now have a sure 30 cents in their hands.

Another highlight of the day was ANI as news came out today that the company is going to conduct a 1:1 stock rights offering at P2.50 per share. The attraction of this one isn't exactly the low offering price but rather, subscribers of the rights shall be entitled to free warrants at a ratio of 1 warrant for every 2 shares acquired by the stockholder. The company pegged the strike price of the warrant at P10.00 per share. This will be another new playground for the Tsupiteros. :-)

For the last couple of weeks, DGTL has been quite weak due to the huge foreign selling order in the stock. Today, something quite interesting happened - Macquarie crossed 65 million shares at P1.44 per share 9 minutes before today's close. The question now is, could this be the last batch of selling from the foreign funds?

Sold my position in AMC too early today. Oh well, "wala pa ring tatalo sa Alaska". :-)

One more trading day before the New Trading System of the PSE goes online. It will be a whole new different ballgame come Monday.

I saw a lot of movement in the market today but the index itself did not move a lot. I guess, without the run-up in ALI today, the market would have been almost unchanged. The problem with trading this market right now is, you need to anticipate what's going to move. If you buy after you see the move, you're already too late and you may already be buying at the highs. If you get ahead and buy too early, you might be buying something that will not move. I'm playing this market very cautiously. I think both our market and the Dow is directionless right now.

I wonder what the fuzz was all about in MPI. I think a lot may have been whipsawed in that stock today. Could the stock actually have formed a major bottom already today at 2.48?

I really wonder why broker 110 is buying and selling so much shares in ORE at almost the same prices everyday. JAP, pag hindi ka na galit sa'kin, I hope you can explain it to me someday. :-)

By the way, here's an interesting excerpt from this week's newsletter of http://www.mmacycles.com/, which is a financial astrology website:

"...We are entering a time band of perhaps the most powerful geocosmics signatures of a lifetime. We’ve never seen anything quite like what we are about to witness in the next month. So we don’t really know what to expect, except the unexpected. Normally we might think the Saturn-Uranus opposition would be a crash, and it might be. The previous four times in this series, it has correlated with a crest (not a trough), and after three of those times, the DJIA fell over 1500 points within the next 3-6 weeks. If you want to trade, you have to be nimble and ready to reverse quickly, perhaps on an almost daily schedule. If you cannot handle the stress of risk, stay out and watch this cosmically historical pattern unfold, and watch with amazement at the types of human activities and financial market movements that will likely unfold – assuming they don’t do the unexpected and absolutely nothing of note happens."

Dow drops by 261 points and our market dropped by just 18 points. Dow climbs up by 56 points and our market still drops by 18 points. Talk about a very confused market! I don't think I even want to make a guess what the market is going to do by tomorrow.

I've been under-estimating the strength of RFM and VLL for the last few days. Admittedly, I've been calling a "take profits" on these stocks since last Friday, yet, prices just continue to climb higher. I guess bears like me will be correct one of these days (haha). If you remember, I recommended buying VLL as early as the 1.60s levels while no one was buying it. I figured that the stock was erroneously sold down simply because Villar lost the elections. There is one stock right now that appears to me is in the same situation as VLL when it was at the 1.60s levels. It was also sold down aggressively simply because Noynoy won the elections. I bought a small position in this stock today. By the way, good luck on your RFM Mr. Jaka! :-)

ORE was the strongest stock in the market today. Given the way it behaved today, this should begin to trend up already. The key word here is "should".

PNB continued to be relatively strong today. Curiously though, despite the huge buying orders from CLSA, Deutsche Regis and Macquarie, foreign funds were net sellers today in PNB. Hmmm...

Dow drops by 261 points and what did our market do? It drops by a mere 18 points with even a lot of issues going higher. Prices isn't trending up, yet, it ain't dropping either. So, what do we do? One thing I noticed though is, I make more money when the Dow drops a lot compared when it goes up a lot. Hmmm

I'd like to congratulate CLSA and Macquarie in VLL. I wonder if those were foreign funds or Mr. Villar himself.

For the first time in a long time, we finally got a taste of a stock that went to the ceiling price by way of MED. Could this be the start of some "ceiling plays" once again? I really miss those days. Good luck Mr. Jaka!

VUL was also very strong today on news that it was going to do a rights offering at P1.00. I could be a buyer of the stock this morning but I'll be a seller at P1.00.

Another highlight of the day was PNB. I heard rumors this morning that PNB is no longer a "merger play" but may actually be a buyout? Maybe El Kapitan is slowly preparing for retirement perhaps?

My experience in the market today made me contemplate on the state of this market. Yesterday, there were only three stocks that looked very strong: JGS, RFM and VLL. I don't like to trade RFM because it's just too choppy. I didn't like VLL either because I find it too high already. So, I chose to trade JGS. The stock moved very strong for the first time in one month, closed at a new high and had foreign participation. Today, there were just a complete absence of buyers. It's as if everyone who wanted to buy the stock have already bought and there was just no one else left who was willing to bid it up anymore. I decided to sell my position at cost today.

The complexion of this market has changed a lot in the last two months. It has just been a slow grinding up and very selective market. To make money, you not only have to be very, very patient, you also need to buy the right stocks. Tsupiteros like me are not making much in this environment. It is those people who buy low and wait that make money. The problem I have is, I'm certainly not willing to change my strategy at this point in the game with the market already up by so much since the Mar 2009 low. So, what do I do? JAP and Chucky are certainly not giving anything for free. The speculative issues are in a coma and the high-flyers are, well, already too high. Let me know if you have any suggestions.

Looking at the market from a bigger perspective, I would tend to think that we are now in the last phase of this bull market, which began last Mar 2009. The markets are still strong because they are expecting good 2nd quarter reports. However, there will be a slowdown in the 2nd half and up to next year because the effects of the stimulus packages would have worn out already. So, will the markets "sell on the news" once the 2nd quarter reports come out? We have three weeks to play 'til ghost month begins on Aug 10. We better make the most out of this next couple of weeks.

This market has only been forgiving for those who know how to follow the trend. For those who are trying to pick bottoms, they are probably not making very much right now.

Dow has been up by for seven consecutive days in a row. Could it be toppish in the short-term right now? I'll be quite surprised if the Dow continues to climb up by tonight. Of course, I think everybody has been expecting the Dow to drop since a few days ago. Eventually, the bears will be correct. :-)

The race between DGTL and VLL has been overwhelmingly won by VLL. However, at current levels of both issues, could it be time to shift from VLL to DGTL once again?

I think some property issues peaked in the short-term either yesterday or today but they are definitely trending up.

I haven't been writing in my blog cause I've been quite busy. I was suppose to write something last night but power got cut-off in our house because of the storm.

Anyway, our market has obviously broken out convincingly above its 13-week consolidation and may already be on its way to my original target of 3600. I don't know if you've noticed though but, although the market is now in a trending phase, it is trending up in slow motion. Is this behavior bullish or bearish? I would like to think that it is bullish because, with this kind of behavior, some are selling pre-maturely and could potentially buy higher. Nevertheless, it is still a very, very selective market, especially if you go to the 3rd line sector.

Since yesterday, it would appear that the darling right now are the property issues. I don't know what the foreign funds ate but they suddenly developed a huge appetite to buy property issues like ALI and MEG. RLC and SMPH are a bit lagging at the moment compared with ALI and MEG but I would tend to think that these two will eventually play catch up as these two issues are the main plays on the REIT law. If I'm not mistaken, they are simply waiting for the implementing rules and regulations from the BIR to jump-start this law. I expect a "breakout" on these two issues soon. FLI seems to be in middle of these two groups. VLL has gone up quite a lot already so that might consolidate first for now. ETON is a double-bladed sword as it is not only a property play but also an El Kapitan play. The weirdest property stock for me right now is SMDC but I'm still bullish on this one as well. I'm not touching LND but ELI, in my opinion, could be a dark horse.

I had a great time in the party last night. I approached JAP and shook his hands and he was sport enough to shake my hands as well (I'm quite relieved that he didn't punch me in the face). I listened to his speech and one of a couple of things that I remembered that he said were: that we are all Filipinos and we should work together, and, one should learn to buy when no one else is buying and sell when everyone is buying. I totally agree with him on these issues. I also remember him saying that he made mistakes in GEO and other issues. One thing that he mentioned that I disagreed, of course, was that he downplayed that use of Technical Analysis in the markets. Well, to each his own on that one but I would presume that he uses Technical Analysis too but he just doesn't know it. There were some company presentations and, of course, there was a company presentation on ORE. I listened but, of course, I'm a skeptic as people probably know by now that I am a skeptic on everything under the sun. In my opinion, it is very difficult to turn a company that is currently "nothing" into "something" but, to be fair with JAP, I'm giving him the benefit of the doubt. I sincerely wish him good luck that he will be able to turn this company around and that he will make a lot of stakeholders very, very happy in the future.

So, is the market a breakout or not? I guess this is still the question that everybody is asking themselves right now. I don't know myself but I'm staying defensive for now, just to be on the safe side.

I'm quite amused by ORE right now. Could the play be over already? I'm excited to meet the boss tonight. :-)

FPH and BPC were one of the strongest stocks in the market today as FPH announced a P6 billion buyback program. Congratulations to all those who have this one!

I would like to congratulate my officemate in HDI for being the very first person I know who tried to day-trade Manila Bulletin. Nice try bro! (haha)

I was kinda busy yesterday, which is why I wasn't able to write here in my blog.

Anyway, finally, the Dow was able to rally from its lows. Now what? Time to short-sell perhaps? It is interesting to note that Jakarta and Kuala Lumpur, which have been very strong markets as of late along with our market, were hardly up today. Did our market really breakout today or is it a trap? Another thing worth noticing is that, even though the US markets climbed up a whopping 3% last night, you would be very lucky already if your position climbed up by 5% today.

There will be a grand eyeball tomorrow between my friends at Absolute Traders and my other friends at FinanceManila. JAP will be the special guest of honor. I'm guessing that ORE will register at a new 52-week high by tomorrow. This time, I can really congratulate you Mr. HE Bennett! :-)

In the last couple of days, I was thinking that the market has broken down already and will begin to trend down. Obviously, the market is still alive but is still within the "calm before the storm". Notice that value turnover has now dropped significantly from its average. I guess some people (including myself) are still betting that the Dow will begin to rebound either tonight or tomorrow night. I'm expecting a massive short squeeze rally soon. The big question is, what happens after that? By the way, if the Dow drops by 3 digits again tonight or tomorrow night, that behavior would confirm that that market is now in a bear market.

SOC was the top gainer in the market today. I heard some news that the company was planning to drill some oil in Palawan this July. It's high today though at 3.45 is a major resistance level. Will try to get more info on this one. Congratulations to all who have SOC!

Today was probably one of the most boring days of the year as value turnover was even less than P2 billion. Can the market still trend up from here? While there may be buyers down below, there is obviously a lack of buyers up above. I think the Dow can rally from here but I really doubt if it can still climb back up towards 10600. Today is a holiday in the US so we won't know the verdict until Tuesday night.

There's some activity in the Power sector today as the Aboitizes and EDC were relatively strong. Be careful on some companies announcing that they too are going into power. While they may say that they have plans of entering the power business, some of these are merely stating such in order to sell their shares in the market at a high price. This same phenomenon happened when mining was the "in" thing and it too happened when being in the BPO sector were the "in" thing.

The highlight of the day was no other than Mr. JAP's ORE. I'm guessing that this will be bullish until Friday. :-)

In times of peak uncertainty, market participants tend to look at the bigger picture for answers. I’m not talking about the big philosophical “whys” of life (e.g., Why do I exist?), but the more market oriented questions: What is causing this market behavior? Why is it happening? Can it continue?

Certainly, this discussion is taking place now that the markets are reaching nine month lows. Pundits lament that corporate earnings are projected to be very strong when second quarter numbers are rolled out. The bears point out that state and local governments will have trouble balancing budgets with current revenue shortfalls and bailout money fading. This will lead to payroll cuts that directly affect consumption patterns and will have trickle down effects on the economy.

As with most macroeconomic analysis, it’s almost impossible to tell which point of view will win in the intermediate term. We do know, however, that this market downturn has added a significant element of fear back into the market. Multiple media outlets report that Google searches for phrases like “double dip recession” have increased in the last ten days. And, as reported in Barron's, many professional money managers are moving more toward cash.

Some of the most intriguing work that I’ve been looking at points to a structural change taking place in market activity. Let me explain what I mean by structural change and then we’ll look at what might be brewing.

Some would argue that we have just entered another bear market phase in equities. That is a change in market category or type. When I talk about structural changes, I’m referring to fundamental changes in the way markets operate over time. Any number of causes can produce this level of change, but I’ll mention three of them today: technology, regulation, and financial innovation.

New technology, like the telephone in Jesse Livermore’s day or in the Internet in ours, has certainly caused changes in how the markets behave (among other effects, both of these technologies shortened the news cycle).

Regulatory changes definitely have affected the way markets behave. When margin requirements were raised from 10% to 50% after the 1929 crash, fewer dollars were chasing the same amount of shares. The data reporting and execution changes made in 1997 that made intraday trading possible for retail traders ushered in a new order of magnitude of volume into the market. Decimalization further reduced transaction costs and almost completely killed one type of trading (retail market making became virtually unprofitable).

Financial instrument innovations have also led to structural market changes. Mutual Funds allowed retail investors to participate in equities markets on a scale never before seen. Derivatives allowed institutions to hedge risk and/or take on huge leverage in ways that were not possible previously.

All of these changes led to different trading and investing dynamics. At their core, however, market movements remain driven as always by the cumulative effects of the market participants' fear and greed. We can display the classic investor psychology market cycle of bottom, rise, peak, fall on a chart as a sine wave.

Even though the forces that drive the markets remain the same, it fascinates me that their expression is evolving. If you think about the cycle of a sine curve, it moves up and down a certain amount and it repeats within a certain time frame. Structural changes in the markets are altering the characteristics of that cycle. It seems that the amplitude (the level of highs and lows) is increasing while the frequency (time between successive highs or lows) is getting shorter.

I saw the chart below in a blog recently. This intriguing graphical display depicts the expanding amplitude of the moves of the Dow over the past 12+ years.

We’ve crossed below the “12 year breakeven” line since this graphic was made in May 2010 with the Dow closing at 9774 on Wednesday. But the reality of the chart is stunning: bigger and faster climbs followed by bigger and faster drops. And for the past 12 years or so, this led long term investors on a road to nowhere.

This visual is perhaps the best that I’ve seen that truly shows how buy and hold is dead. Imagine the work involved holding onto investments for 12 years that included an Internet boom and a real estate boom and having no gains to show for the effort in the end.

About the Author: A passion for the systematic approach to the markets and lifelong love of teaching and learning have propelled D.R. Barton, Jr. to the top of the investment and trading arena. He is a regularly featured guest on both Report on Business TV, and WTOP News Radio in Washington, D.C., and has been a guest on Bloomberg Radio. His articles have appeared on SmartMoney.com and Financial Advisor magazine. You may contact D.R. at "drbarton" at "iitm.com".

I think the Dow may have bottomed-out already last night in the short-term. I would be quite concerned for the short-sellers in the US markets already right now but I would be more concerned for those who are currently long here in the PSE if the short-sellers in the US continue to make money. Actually, even if the short-sellers in the US lose money, I am still quite concerned of those who are currently long in the PSE. :-)

I have a trick question, what would happen if everybody was looking at the same pattern and was looking at one direction? Below is a picture of the S&P 500 with prices appearing to have already broken down below the neckline of its head and shoulders pattern.

No, I'm not bullish but prices can certainly rebound from here. Obviously, my "Dow 10900" has become invalidated already and maybe even my PSEi 3600. I'm beginning to see "ghosts" instead.

I've updated my Tsupitero index to give us a real sense of what the whole market is doing.

I removed the following issues from the index: EDC, FPH, TUNA, AGI, LIHC, BRN, FLI, ISM, WEB, PAX and GEO.

I added the following issues from the index: AP, ANI, JGS, BEL, CYBR, MRC, SMDC, DGTL, APC, CPM and ORE.

The index is currently up by 26.28% year to date as compared with the PSEi which is up by 10.52% year to date. My previous Tsupitero index was up by just 2% year to date. This just goes to show us that the market has been highly selective in the last six months. For one to have made money, you ought to have been in the right horse, so to speak. The question now is, do we continue to buy what's strong, or, do we start buying what's low? Anyway, here's how the index looks like right now: