WHILE we are recovering from Christmas and getting ready to ring in the New Year, it is probably a good time to share my thoughts for 2015, maybe while no one is watching.
On February 8 the title of this column was “Buy the breakout”, referring to the fact that I thought both the Philippine peso and the Philippine stock market would appreciate through 2014. The peso did appreciate by over 10 percent, and then gave back those gains. The stock market hung on to its approximate 10-percent increase.
Throughout 2014 we continued to hear that the Philippine economy and the stock market were due for a major drop. Neither of those predictions came true, as most of the gloom and doom offered by the experts failed to materialize.
You may believe that the financial and asset markets are manipulated, rigged and moving outside the bounds of reality, and you could be right. However, it is still real money that moves those markets.
As economic and business-cycle forecaster Martin A. Armstrong
recently wrote, “They [the ‘experts’] continue to cling to old theories that no longer work, while ignoring the fact that the markets have proven them wrong as they continue to try to blame anyone but themselves.”
No matter how far out of line you believe stock prices might be, sitting smugly and waiting for the collapse is a fool’s game that denies you the opportunity to make money.
Armstrong may be a controversial figure, but his work on cycles is something that cannot be ignored. The cycles of life that we experience everyday cannot be ignored, either. No matter how you twist the logic to suit your theories, making nine women pregnant will not produce a baby in one month.
Cycles can be expressed in clear and well-defined mathematical terms. The pretty shape of a seashell or sunflower follows a precise arrangement that is known as the Fibonacci sequence, named after 12th-century Italian mathematician Leonardo Bonacci. However, the similar “Golden Ratio” was discussed by the Greek philosopher Plato 1,700 years earlier. These two concepts formed some stock-market forecasting tools, including the Elliot Wave and Fibonacci Retracements.
There are several cycles that occur repeatedly in the Philippine Stock Exchange (PSE) that are similar to Armstrong’s economic-confidence model. He is expecting a crisis period to unfold beginning in September 2015, and I am inclined to agree, based on the PSE cycles.
I have written so many times that the party is not over as the market continues to move higher. For 2015 the lights may begin to dim as this PSE run starts to come to a close.
Without going into the particular PSE cycles, as they are from my proprietary research, it is interesting that they coincide with Armstrong’s analysis. It could be, and probably is, all coincidental. However, the September/October 2015 window is well-supported.
The next question: If that window proves to be “the beginning of the end”, what will the PSE do between now and then?
We can assume that the PSE index will end December on a negative note, as we only have one more day of trading this year, and that is next Monday. But then again, this market is unpredictable, and we could conceivably regain the 1.5 percent we are currently down with.
But the index has been stuck below the 7,300 level for four months now. Is this, then, a market under accumulation to go higher or faced with distribution before a decline? Check back on January 9 for the answer to that question.
Longer term, I believe that the market is going to move up and reach a new daily historic high closing. But tops and bottom are very easy to see in hindsight, but are difficult to predict.
Here is what we need to watch in the first quarter: The dollar is in a strong uptrend. If the peso weakens, that would not be good for the stock market. The Philippine bond market is predicting that government interest rates will go higher—another stock-market negative. The first-quarter 2015 economic growth numbers will be very important. The PSE index needs to hold the 7,000.
But regardless of what the market does between now and September, I am planning for a more turbulent 2015.
Send me an e-mail at mangun@gmail.com. Visit my website at www.mangunonmarkets.com. Follow me on Twitter at @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.