PSE index still dropping after 5 days
Good evening!
After five consecutive trading days, the Philippine Stock market is still shedding points. The PSE index already broke the psychological support level of 4,000 points, now at 3,902.71 as concerns on the country’s inflation rises. According to ING Bank NV, 2011 inflation forecast at around 4.2%, which is still well within the inflation target of 3-5% set by the Bangko Sentral ng Pilipinas (BSP) between 2011 and 2014. The BSP expects inflation to average 3.6% this year. more details on ABS-CBNnews
From my point of view, technically, the index might continue to correct further to 3,830-3,829, a 78.6% Fibonacci level starting from Oct. 2008. If the index breaks this level, then the next support will be at 3,370 at 61.8% Fib. level. Though the 130-day moving average support was broken, the 200-day MA is still in tact.
I don’t think we will hit lower than 3,700, since the companies’ fundamentals didn’t change, I haven’t read nor heard any bankruptcies as of yet, have you? As we’re waiting for the 4th quarter earnings of the blue chip companies, we just have to ride with the “corrective” wave or stay out of the market if you’re uncomfortable.
Bangladesh Stock Market Crash
Looking at the bright side, we’re still far better off than Bangladesh’s stock market.
If you would recall, Dhaka Stock Exchange Gen. Index (DGEN) soared to its highest levels from October to December last year, with the peak on Dec. 5, 2010 at 8,918 points. Dhakka’s index on Jan. 3, 2010 was at 4568.40 and went up at a staggering 4,350 points or 95.23% increase! But 2 weeks ago, Jan. 10, 2011, trading on the Dhaka Stock Exchange was halted after it fell by 660 points, or 9.25%, in less than an hour, the biggest one-day fall in its 55-year history. Police and angry retail investors clashed after the stock market sufferred huge losses. More details on BBC
Dhaka Stock Exchange General Index and PSEi
If we compare the indexes of Bangladesh and Philippines on a 5 year chart (2006-2011), we will notice that DSE’s index rose too fast upwards too soon. Always keep in mind that in these exaggerated conditions, there’s always a correction phase, a correction in time and a correction in magnitude.
In the case of Bangladesh, many people were enticed by the bull run of 2010 and many retail investors got into the market. Due to the rumors that large institutional investors had pulled their money out after making large profits, almost everyone panicked and affected the 3.3 million investors, about 80 percent of whom are small traders.
http://www.bloomberg.com/apps/quote?ticker=DHAKA:IND
In my opinion, financial literacy is still important in every investment vehicle. If you’re smart enough, you wouldn’t put your life savings in the stock market. To explain market psyche and crowd psychology, people who are in a crowd act differently towards people from those who are thinking individually. The minute the common reason for being is disrupted, one by one the members of the crowd dispersed, trend then reverses. If you like to gamble, go to a casino instead.
PSE Top Picks
Still my top picks are properties which are already in the oversold region, MEG, FLI, ALI, SMPH, VLL. We “might” begin to rally for the next couple of days if the DJIA hits 12,000. 
To answer my question on the previous post… Nope, EDC is not forming an ascending triangle. 
Good luck everyone! Due diligence is a must!
