Based on Bloomberg, PSEi already fell from its overvaluation last 5300 (19 P/E), at current 4850, it is now at 16.5 P/E (but is still above the Asian 13-14x Average), a more comfortable level. Our GDP is not so high like China, but we are in an emerging country having sustainable growth YoY.
The 2011-2012 Rally of PSEi was enormous that makes me think that 50% and 61.8% retracement is highly probable and better for this economy.
50% retracement - 4500
61.8% retracement - 4688
These levels are still very far from the current 48xx, but is attainable once we see PSEi break below its possible Medium Term uptrend, based on charts attached.
People who bought last Thurs, has been whipsawed on Friday. I'm so happy that our Market is trading like a REAL MARKET,people getting whipsawed and not just the typical 5pt correction following a 50pt rally.
The Negative Divergence(MACD,RSI) formed since Feb2012-May2012 indicated a good result showing selloff/correction will follow after 5300 TOP. I hope people today are in CASH position after that hint, Negative Divergence usually hint a selloff may happen soon, so dont skip this "technical TIP" to stay safe. Usual Negative Divergence result to months-years timeframe, no one can forecast, just stay safe next time when Indicators show some weaknesses.
4500 PSEi is accommodating and my preferred support IF EVER, for now, be selective on your stock picks, and prefer 10x-15x valuation companies under Energy and Banks.
Waiting for DOW important 12250-12294 to hold, S&P 1292 to hold and rally, before starting to get into PSEi Market. Else, more selloffs may occur. Stay Safe!
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