Hi Everyone! A quick thank you to everyone who joined our two #FBLiveSessions for the week. I had fun answering all your questions and talking about your stock requests! As of this writing, we are just 3 days away before we all elect a new president and as the hype towards the elections is heating up, here’s a quick update on where the market is headed along with commentary on the market and the previous elections. By the way, the market will be closed on Monday so this gives you time to check your charts and your fundamentals so you can build your trading plan.
The reason why I am writing this blog is that I have received tons of emails and messages asking me what do I think will happen to the market after the election. I know there have been a lot of reports and charts posted saying that the PSEi will go up after each elections and there have been mixed emotions of fear and excitement on how the market will react. I just want to encourage you, don’t let your emotions cloud your judgement, don’t speculate or give into the hype. Base your trades on what the charts and the fundamentals tell you. That is the best way to strategically come in and out of the market.
When you look at the context of it, the 1992, elections came at a time when the market dropped due to excessive brownouts, the failed coup attempts and our economy at that time was just recovering from the wreckage of 20 years of marial law. While when you look at the 1998 elections, it just came after the Asian Financial Crisis in 1997, which caused the market to drop and hit the bottom as well. The 2010 elections was no different, it came at a time where the market as a whole was rebounding from the bottoms of the 2008 market crash. If you look at this 3 election periods most of them came at a time when the PSEi was at its lows and there was significant fundamental reasons on why the markets massively dropped. The 2004 elections was a different case though, there was no global, regional or national crisis at that time but even so the market was at the bottom and was at historic lows. Different periods, different reasons but as what they always say, history repeats itself.
To put it simply
To put it simply, like a ball, what drops eventually bounces. Like what happened in the 1992, 1998, 2004 and 2010 elections where the market bottomed out and was reversing from a downtrend. It just so happened that in the past 4 elections the market was so low and it just had to reverse already.
What I want to submit to you is the idea that not all market conditions are the same during each elections and that we treat each market depending on the prevailing market conditions at that point in time. My goal for this blog post is to educate you so you can create your own strategy depending on the scenarios that may happen after the elections. Just a heads up this is not a political post, this is something aimed to help you as an investor to be aware on what is happening in the markets.
Just a quick plug before we begin, to all our friends in Manila that want to learn more about how you can earn in the stock market, I will be setting up a live training session here this June 4 and 11. For our Manila seminar, we will be having 4 action packed modules, For the 1st session, I will talk about how you can select amazing stocks (Fundamental Analysis) and for the other 3 sessions I will share on how you can find the best time to buy and sell those stocks (Technical Analysis)! This is aimed for both traders and investors who would want to maximize their gains while they are invested in the market. Also if you are from other other regions of the world, we also have Stock Smarts in Singapore, UAE, Australia, Manila, Cebu, Qatar and New Zealand in the next few months! ICON will also be back at Samsung Hall this year, with 7 speakers and more than 1000 people hungry to learn! It is my greatest desire to see more Filipinos both here and abroad to learn the right way to invest. It’s just about time that we reduce scams and we see more people move from consumers to investors!
The 2016 Elections
Fast forward to 2016. I wrote on a previous post that the PSEi was hanging on by a thread to stay bullish. That short term bullish movement, ended yesterday when the market dropped and closed below 7,000. As of this writing the PSEi is currently bearish at 6,991. Not just bearish, valuations wise it is still currently expensive with a P/E of 21.20x.
Basing on the charts the market is relatively oversold already, however, there are no buy signals in sight yet as it is currently undergoing a breakdown of sorts. The stock is now forming a short term downtrend and could possibly drop to 6,870 over the short term.
For the PSEi to have a shot at staying bullish it must bounce back and stay above 7,000 but if it wants to trend higher it must by all means break past 7,400. Which remains to be the biggest resistance for the market in the past few months. If it does that, then the PSEi will now have a target price of 7,700. I would be happy though if the market comes back at 7,000 and stays and holds that level.
Should the PSEi fail to comeback to 7,000, it will follow the progression I mentioned above that it could drop to 6,870 and if that does not hold it could drop to 6,600 over the short to mid term. Should this happen better stay in cash first so you can pick selective areas later on when the PSEi starts to bounce back and reverse upward. For sure I would be able to give you an update should that happen in the future.
We are at a different scenario now than in the past elections. The market is high and just started to breakdown. But it does not mean that you will have to lose money while this is happening. You can be strategic in your trades and find ways to out smart and out thing the market. You have to remember that stock market trading and investing is all about managing risks and making the most of it when the market is trending upward.
That’s all for now. I wish you all the best as you vote this Monday and that you vote with what your heart and mind tells you to do. We have to remember that everyone wants to have a better country and it does not take one man alone to make a country great. It starts from all of us taking our place and doing what we can to make this country better. For me, I have found mine and its to invest and bring others along the way with me through education. No matter who wins, I will trade, invest and still do business. Life doesn’t stop, you will earn and have a good live no matter who wins.
This is aimed to help investors have a holistic sense on how they can grow, maximize, and preserve their wealth!(Stock Smarts Book 4 is also coming this year) I also feature other books in my website with authors that I respect which have different expertise in Finance, Business, Investing and everything else in between.
For more details and to order: Marvin Germo Book Orders