1ST HALF TECHNICAL OUTLOOK

Transcription

1 1ST HALF TECHNICAL OUTLOOK

2 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

3 GLOBAL TECHNICALITIES

4 Markets Proceed to Slide in 2016 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 PSEi vs SP500, DMs, EMs & CHINA (YTD) PSEi -9.9% SP % MS WORLD -11.7% MS EMF % CHINA -15.8%

5 What happened? China, Devals, Rates, Oil Shanghai Index Chinese Yuan Overbought (S1) 2,850 (S2) 2,420 China has fallen over 40% from its high in June 2015; has recently passed below 2015 s lowest close The Chinese Yuan still shows a devaluating trend but did hit overbought levels (needs to adjust)

6 What happened? China, Devals, Rates, Oil US I-Rates Vs Dow Jones IA (S1) 15,470 (S2) 14,800 Historically when US Rates begin to rise, the Dow Jones usually shows negative response into the shortmedium 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

7 What happened? China, Devals, Rates, Oil SP500 US Dollar Index (S1) 1,840 (S2) 1,750 Sp500 has corrected dangerously close to its 7-yr Up Trendline Support [1,840 followed by 1,750-1,570] The Dollar (Index) upholds its upward bias aided by I-Rates rebounding track support (98.15 / )

8 What happened? China, Devals, Rates, Oil NY Crude Oil OPEC & World Oil Supply (S1) (S2) Oil prices remain into a down trend and now fall below $30; tags price areas last seen in 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

9 Effect: Heavy Corrections with Bearish Tones % Drop from its 2015 High CURRENT* 2015 HIGH % DROP US (SP500) 1,859 2, % Malaysia 1,618 1, % India 24,062 28, % Australia 4,896 5, % Indonesia 4,479 5, % Japan 16,416 20, % Thailand 1,248 1, % Philippines 6,259 8, % Germany 9,391 12, % Singapore 2,559 3, % Hong Kong 18,886 28, % China 2,976 5, % * Closing data as of Jan 20, 2015 [ B e a r i s h Z o n e ] What makes a Bear? 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. Validations: 20% Drop Broad Market > 2-Months [ ] [ ] [ x ]

10 PHILIPPINE TECHNICALITIES

11 The Philippine Scene The Philippine main line Indices have fallen below the 20% bearish threshold but extreme declines may soon need counter rallies [ Sub Indices ] [ Main ] Index Current* 2015 Top % Drop >2-Months Weekly RSI** PSEi 6, , % No 26.4% All Share 3, , % No 24.3% Holdings 5, , % X No 28.5% Comm/Ind 10, , % No 30.6% Financials 1, , % No 29.6% Property 2, , % No 26.3% Services 1, , % Yes 23.4% Mining/Oil 8, , % 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

12 Philippine PSEi and Peso Philippine Stock Exchange Index Philippine Peso ,600 (S1) 5,890 (S2) 5,700 5,890 * As of Jan 21, 2016 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 The Peso is now channeling up, now closer to range highs of (R). Support is seen at

13 Mapping the PSEi on the Elliot Wave Wave Track: 5 th wave of a Bearish A wave B wave recovery should come next (major rally) Bullish Bearish Followed by a C 5,700 (S1) 5,890 (S2) 5,700

14 What does a B wave look like? Basing Pattern or V -Shape B Wave: Must first establish a base Usually by a basing pattern (double base or higher-low) or V-Shape drive (R1) 6,600-6,700 (R2) 7,000-7,400 Double Low Higher Low C A B V-Shape Possible rally towards 6,600-6,700; hopefully it widens to 7,000-7,400

15 Trading Strategy 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)

16 How to Spot Selling Extremes Signals: Look for oversold conditions in good quality stocks (pref Big Blues, 1 st 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 Universal Robina (URC) URC (Jan 11,2016) Daily RSI 23% / 29% Weekly RSI 39% / 45% Divergence Possible (Yes) 8-Day /16-Day MA 182 /

17 How to Spot Selling Extremes JG Summit (JGS) Ayala Land Inc (ALI) JGS Daily RSI 28% Weekly RSI 27% Divergence No 8-Day /16-Day MA / ALI Daily RSI 25% Weekly RSI 30% Divergence No 8-Day /16-Day MA / 30.90

18 Short term Basing Patterns & V-Shapes Ayala Corporation (AC) 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 Oversold

19 PSEi 30 Rundown on Oversold Potentials Stock Price Daily RSI Weekly RSI 8-day MA % Diff 16-day MA % Diff 32-Day MA % Diff AC % % % AEV % % % AGI % % % ALI % % % AP % % % BDO % % % BLOOM % % % BPI % % % DMC % % % EDC % % % EMP % % % FGEN % % % GLO % % % GTCAP % % % ICT % % % JFC % % % JGS % % % LTG % % % MBT % % % MEG % % % MER % % % MPI % % % PCOR % % % RLC % % % SCC % % % SM % % % SMC % % % SMPH % % % TEL % % % URC % % % LEGEND: Oversold % Diff > 5% % Diff > 10% Worthy Pick

20 SUMMARY: 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

21 Good Luck! Mr. Trader Volatility is greatest at turning points, diminishing as a new trend becomes established. G. Soros {Miss Ms. 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 Sgt Shake Out Time is your friend, impulse is you enemy. J. Bogle JUAN G. BARREDO CHIEF TECHNICAL ANALYST JUANIS.BARREDO@COLFINANCIAL.COM Femme {Miss EIP} Fund 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