SLOW AND SOFT by Gus Cosio

6:10 pm  Monday  5 July 2010   Philippine Stock Exchange Index  3311.74 (+0.63%) Of the 20 point rise in the index today, 18 points were contributed by five stocks – TEL (5.48), AEV (5.33), AC (4.14), EDC (1.68) and AP (1.27).  It also appears that no one wanted to commit much into the market today.  The dismal volume tells me that buyers would have abandoned the market today except for those who are convinced that our market had indeed decoupled.  Prices are higher, but volumes are lower. This tells a different story of ambivalence.  As I mentioned yesterday, there are a lot of cheap stocks out there.  Unfortunately, not too much interest has developed yet. It is encouraging that the U.S. economy was still generating jobs in the private sector based on the 83,000 increase in private payrolls.  It is quite clear, however, that the economic recovery has shifted into a lower gear.  In Europe, it would be pretty much the same with sharp slowdowns in Southern Europe but with some manufacturing pick up in the north – Germany, the Netherlands and Poland.  Europe and Asia is trading mixed given the New York Holiday today. I am not surprised  that TEL went stronger today because even at 2400, this stock is cheap.  EDC looks to be strongly supported at 4.50.  It closed at 4.55 already because it has run out of sellers.  My theory that AP would be very strong below 18 seems to have  been proven right today.  DMC at 17 looks to be attracting strong interest also. Anyway, it would be premature to say that investors were unfazed by the declines in Wall Street because many of them are still skeptical.  Historically, the third quarter is slow when it comes to stock investing.  The reason is simple; it is vacation time in the western hemisphere where most of the fund managers are located.  Actually, even in Singapore, Hong-Kong, Japan and Korea, a lot of finance people take their vacations this time of the year. I suspect that the next couple of weeks are going to be tough in the market because of the west.  With activity subdued and many nurturing fears of another slow growth for the global economy in the two quarters ahead, it would be good not to be bold.  A nibble here and there would probably not hurt trading positions.  The main thing is to raise enough cash in anticipation of a slowdown.   When activity is slow, prices turn soft anyway.