Market Direction Obscure as Stocks Consolidate, Analysts Weigh In
The market has been moving sideways recently, following its impressive rebound a few weeks ago. After falling below its long-time support level of 6,400, the market made a remarkable breakout from its immediate resistance point of 6,600. However, since then, the market has been bouncing up and down within several points of the 6,600 level, making it difficult to determine its true direction.
The market’s current movement can be explained by both technical and fundamental factors. The 400-point run-up created opportunities for profit-taking, and market participants have chosen to engage in swing trading due to ongoing uncertainties and a lack of fresh leads. Swing trading involves making short-term trades to profit from anticipated price moves. However, these short-term trades can produce initial false signals that may obscure the true direction of the market.
Opinions among market insiders vary regarding the market’s direction. Trading Economics, a US firm that provides market information, has forecasted that the market may trade below 6,300 by the end of the quarter and hit 6,000 within 12 months based on its global macro models.
Jofer Gaite, the president and chief trader of Westlink Global Equities, Inc., believes the market will take a temporary rest rather than dropping as low as Trading Economics predicts. Gaite estimates that the market will continue to move sideways within a range slightly below or above 6,600 until new leads emerge as catalysts for an upward direction.
Market strategist Joel Dela Peña of H.E. Bennett Sec. agrees with Gaite but emphasizes the need for a more potent driver to counter lingering uncertainties, particularly the country’s inflation outlook. While inflation seems to be cooling off, the Philippines still has the highest inflation rate in the region. Dela Peña believes the market may correct down to 6,450 or 6,400, but it will likely remain within the support-resistance range of 6,400 to 6,700.
Joey Roxas, president and chief trader of Eagle Equities, Inc., shares the belief that the market will pause starting this week, given the upcoming Ghost Month in August, which is traditionally a down period. However, Roxas also sees potential for the market to move up with the emergence of new leads.
Stockbroker Rene De los Reyes of Abacus Capital & Investment Corporation offers a more positive outlook, stating that another breakout will happen, although the timing is uncertain. De los Reyes targets 6,800 as the next level and expects the market to find immediate support at 6,400. He based his forecast on their firm’s study of the market’s ten-year price-earnings multiple (P/E ratio) performance, which has shown mean-revertive behavior and a tendency to climb back to its original higher P/E ratio by the end of the year.
Despite differing perspectives, it is clear that the market is currently in a consolidation phase or an extended period of basing. Volume has been light, and price ranges have been flat to choppy, typical signs of a consolidation period. As the market continues to consolidate, it is important to note that longer consolidation periods often result in stronger breakouts. This uncertainty in direction poses challenges for investors, but it is crucial to closely monitor any new leads or catalysts that may provide clarity for the market’s next move.
In conclusion, while analysts may have varying predictions for the market’s direction, it is essential for investors to remain cautious and adapt their strategies accordingly. The market’s true direction remains obscure, but by closely observing economic indicators, inflation rates, and potential catalysts, investors can make informed decisions and navigate the current consolidation phase with confidence.
Disclaimer: This article is a summarization of market opinions and should not be considered as financial advice. Investors are advised to conduct their own research and consult with a professional financial advisor before making any investment decisions.
