PSEi making new 52 week lows, having some good signs 6-24-2013

Daily Chart since 2008

  Medium term Chart

Philippines took multiple boosters(7.x% GDP, S&P Fitch upgraded us 2 notches, good imports/exports) that helped PSEi pump up into new highs! Everyday is like winning a lotto hitting "New All Time Highs" and posting it all over the news. 

Now, there's not even one bad news over PH that made us hit fresh 52 week lows, wonder why what's the reason we are having this correction?? One clear answer is that, people was too complacent and too bullish into this country, pumping money into the system, not considering that valuation was already too high. It hit 22x P/E last 7400, where only the 10yr average was around 15x. And also, market already gave us a good gain, a whopping 200% return in 2 years. It's really normal that market needs to take back some of its gains.

Anyway, we focus on today's analysis,which gives a shining hope that eventually we could bottom soon. I have noticed and concluded some factors that a possible short to medium term bottom could be happening soon, but no assurance Bull comes back immediately, we could bottom but do only a sideways pattern for example at 5800-6400 for 6mos, etc.

1. MACD reading was the worst in the history of PSEi (1990-2013). Meaning this 24% drop was the worst drop beating the drop we encountered last 2008 recession.

2. 200MA and current price meet again, last time it happened was Oct 2011. PSEi may find support near this area.

3. We have laid out the target downside of Dow Jones/SPX: 1.5% from last Friday's close minimum, to a target of 4%. That brings PSEi hit around 5500-5800 level. (If markets can extend its rally again and again (like what happened on this rally), it can extend its decline multiple times as well). LINK HERE

4. Head and shoulders of PSEi has target downside of 5700-5900.

5. Valuation dropped to around 17.78 as of 6/24/2013 close, better valuation than before.

6. Few good supports technically are also in place around 5500-5800, and RSI at 29.0

7. We are now in the middle of 31.8% and 50% retracement.

24% in decline is already considered bear market(when market declines 20% or above), but for me, this could just be a correction, since we really flew too high. Though your portfolio would really feel devastated like a bear market scenario :)

Keep your cash ready as always,and maintain the 70-30 rule in investing. 70% investments, 30% cash/liquid investments. As we cannot say if worst may be over. 

Worst case scenario for is that Europe breaks below its support, US follows and decline double digit 15-20%, we might find PSEi near 5000 level (61.8% retracement) 10% chance.

Stay safe and happy shopping!