CAN YOU RESIST VOLUME by Gus Cosio

5:35 pm   Tuesday  13 July 2010  Philippine Stock Exchange Index 3435.85 (+0.85%) Perhaps, I was a bit too cautious particularly because the market has gone to ear-piercing levels and virtual vertigo may have hit me.  Don’t get me wrong.  I still like the market, but for fear of encouraging greed, I had been harping on being cautious and perhaps some people have missed some moves in the market.  My problem is except for issues like PNB or EDC or maybe even MPI, I would not like to buy the market now.  For example, I like AP and DMC, but I’d rather wait for later.  Well, AP may have softened a little but DMC continues to zoom.  Someone actually showed me primary research on DMC this morning valuing the stock at 26.  It comes as no surprise, then, that it rose to 19, trading even as high as 19.25 earlier. I will not be surprised if this rally goes further.  I had earlier thought of 3300 as a short-term resistance, but now that we are at 3435 in the index, we are certainly moving toward a higher plane.  My only problem is that I had always thought of the third quarter of the year as a treacherous time in the market.  The scenes of 3Q 2007 and 2008 are still clear in my mind, and I seem to be jaded by the experience. Nevertheless, I think the bright spot remains to be PNB which has broken the 32.50 resistance.  The other indication of strength is the value turnover today which reached Php 314.6 million.  PNB has never traded this much volume in my memory and I had traded this stock very actively in the late 90′s.  Market sages will always tell you the adage that volume precedes price.  In other words, when you have a tremendous volume spike as you saw today, you can expect a price spike coming.  Perhaps the merger will be coming though, I do not know yet.  One thing is for sure though – today’s volume tells me that demand for the stock has really gone through the roof.  Today’s volume tells me that any loose stocks lying around has found its way to very firm hands.  For all of you who had taken positions on PNB, I think pay-off time is just around the corner. Here are some macroeconomic snippets for those who think that there is a problem with the economy.  Exports for May, with its y-o-y growth of 37.3%, brought it to exceed 2008 levels for the first time since September 2008.  Exports for 2010 will likely rise by 22% but will not exceed the total of $49.1 billion attained in 2008.  Electronics exports expanded by 41% from the same month last year.  Coconut oil exports sizzled with a 188.8% gain. Exports of ignition and other wiring sets also had a big bounce of 56.6%. In terms of destination, the strong recovery of ASEAN and the zero-tariff in most items under AFTA  brought exports to the region to surge by 70%.  With such strength gathering on the production side of the economy, personal consumption expenditure in the second and third quarters should be positive.  We should be looking for sustained growth rates similar to that of the first quarter 2010.