We just went through an unfortunate hostage crisis which brought the stock market down. Yet we are still alive and kicking.  The Philippine Stock Exchange Index (PSEi) already reached the near term target of 3600 before it corrected.  Despite the big drop, we still managed to pick ourselves up and continue the current trend.

Even the Chinese ghost month, which is said to siphon off liquidity in the market, seems to have no effect on the market’s bullishness.  Due to its strength, many are still looking for issues to trade.

The moving averages and the MACD just continue to confirm what we are seeing in the price action: bullishness.  The beauty of what is happening right now is that there are no clear signs of any danger that will affect the market.

We now have to upgrade our upside target for the market which could be met by year end.  We now see 3750 as our upside target.

Recommendation: Buy
Resistance: 3750

The Philippine Stock Exchange Index (PSEi) is not finished with making new 30-month highs.  As we see the DJIA moving sideways, the PSEi has proven itself to have decoupled from the said index and has continued trending higher, much to the delight of most investors.

The moving averages continue to support the rise of the index as there has been no change in the trend and the slope of its rise.

The MACD also continues to confirm the bullishness in the PSEi although it is gingerly oscillating above the zero line.

Our current support is at 3420.  We are still on our way to the near term target of 3600.  There are still some issues that have yet to breakout and we will just wait for the right time to enter.

Slowly, the Dow Jones Industrial Average (DJIA) is checking off each item it needs to do to get back on the bull.  Break back above the neckline, check.  Break the short term resistance line, check.  Set a higher level than the high in June, check.  Break through the moving averages, check.  Surpass the high set in April…not yet.  Looks like that’s the only thing left for the index to do before everyone gets to ride the bull.

Things have patiently turned into the DJIA’s favor as the index is now enjoying a new high after it scared everyone with a possible head and shoulders formation (November 2009 to June 2010) and a possible breakdown to 8415.  Now, current levels are already beyond a danger zone we once saw and it is on its way to retest the high of 11,309.  However, we shouldn’t be too complacent as we saw something bearish.  As the index is rallying, it has also formed what could be a rising wedge.  As of Aug. 12, this pattern has been broken and is now pointing to 10,052.  When that happens, we may have to readjust our sights on the chart once again just to make sure that what is unraveling before us isn’t something bearish on a bigger scale.

The DJIA has broken back below the 100-day & 200 day moving averages at 10,521 & 10,436, respectively.  Only the 65-day moving average is left to serve as its immediate support at 10,263.

The MACD is showing us that the momentum of the index has slowed down and the fast line has already crossed below the slow line.  Looks like we are now going to see a correction coming for the DJIA again.

When the index does go back to 10,052, it would only be a matter of time for it to complete the bigger head & shoulders pattern that are seeing.  The critical point here would be where the neckline is, and that’s at 9,524.  If that is broken, it would be like all hell breaking loose again as we would be seeing a downside target of 8,179.

We’re still a few hundred points away from that disaster area but we should be preparing for the worst while there’s still time.

The Philippine Stock Exchange Index (PSEi) has reached its 30 month peak last week at 3539 and has backed off from that level.  Despite the correction, our local index is still in the midst of a bullish trend.  Should the index continue correcting, the most immediate support that we see is at 3400.  The support line that we’ve made since March of last year is also pointing to roughly around that level.  If the index will still have the strength to move higher, we are seeing 3600 as the most immediate resistance area.

The moving averages are still arranged in the bullish setup to confirm our trend.  At the same time, our MACD is still oscillating above the zero line to confirm the bullish trend.  There have been no changes in both these indicators for the past few weeks as there also has been no change in our trend.

There has been concern that because we are in the midst of the Chinese ghost month, liquidity will dry up and we would expect a lax market.  However, based on previous years’ data, the index has proven this notion otherwise as it has either moved sideways or even higher with the volume being maintained.

To be on the prudent side, we should take our profits when we are satisfied with them and then reenter the market again when the situation has become clear once more.

Recommendation: Take profits
Support: 3400

The Philippine Stock Exchange Index (PSEi) is still bullish despite the implementation of a new trading system.  The new system has caused a lot of adjustment to be made not only from the broker’s side but also from the client’s side as they are all getting used to the new fluctuation structure.  To avoid the confusion, many have decided to stay out of the market until things clear up.  That has contributed to the low value turnover for the past week.

Despite that, the index is still staying above the psychological support of 3400.  Not only that, it continues to stay above the 3 moving averages to continue the bullishness.

The MACD has recently shown that we are experiencing a bit of a correction notwithstanding the PSEi moving to higher levels.  However, this correction signal is quite minor and we believe that our index would just continue on its path.

There are concerns from traders that this run of the PSEi still hasn’t experienced a major correction and that one could be coming soon.  We think that would only happen when bearish signals would show themselves before the index would start going down.  Until that happens, we continue to buy whatever opening presents itself to us.

Recommendation: Buy selectively
Support: 3400

The Philippine Stock Exchange Index (PSEi) is continuing its bullish streak.  Even as the DJIA is undergoing a stage of chaos as both buyers and sellers are struggling for dominance, our own local index enjoys the continued confidence of the traders as we see it reaching 2 year highs.

The previous level of 3360, which we saw before as a critical level that it should break to maintain the bullish sentiment, is now serving as our initial support.  We also have the uptrend support since March 2009, now at 3300.  At the same time, this is the same level that the 65-day moving average is pegged at.  This would make the support at 3300, more significant.

The MACD has corrected a bit but it still maintains a generally bullish outlook for the index.  Therefore, we still see that the MACD is still confirming the bullishness in the PSEi.

There are a number of opportunities that are showing themselves lately.  It would be a sin for us to forego these opportunities if it was already ripe for the taking.

Recommendation: Buy selectively
Support: 3360

If we are to compare the DJIA with our Philippine Stock Exchange Index (PSEi), there is, surprisingly, a discrepancy.  The DJIA has undergone a consolidation phase that turns out to be bearish. It breaks down a bit and rallies past the breakdown point.  Our PSEi however, has never broken its uptrend since March 2009.  There were instances where it looked like the market was going to go into a bear market, from January to February 2010, and May 2010.  But these were not enough to cause panic in the market that would have led to a break of the primary support line.  In fact, the PSEi has made 30-month new highs.

The moving averages still confirm that we are still trending upward as the index continues to pull away from the MAs.  Once again, the MAs are set up in the bullish firing order of the 65MA above the 130MA and the 130MA above the 260MA.

The MACD continues to oscillate above the zero line to confirm the bullish trend in the market but its momentum has slowed due to the recent correction from the high.

We can still set our sights on the upside target of 3540 for the index but we should also expect a correction to come soon.  In the meantime, we should still take advantage of some opportunities in the PSEi.

Recommendation: Buy selectively
Support: 3360

The DJIA has been performing badly. But the PSEi has been testing the resistance at 3360.  Also, the index has still been respecting the uptrend support which is now around 3200.

The index remains bullish as it has been staying above the 3 moving averages.  It is also good to note that the moving averages are in the bullish firing order with the 65-day moving average, being the nearest to the index, serving as support at 3260.

The MACD also confirms that we are still bullish as it continues to oscillate above the zero line although the fast line has crossed below the slow line, reflecting the recent correction in the market.  There could be possible follow through selling in the market but we expected the area of 3200-3260 to be respected.

Knowing that the bears in the US market will be affecting practically every market in the world, it might be wise for us to take whatever profits we have and stay on the sidelines despite our index showing a different picture.

Recommendation: Take profits
Support: 3200

Many chartists are currently harping about the big possibility that the US market is due for a big correction as they already see the three major indices; DJIA, Nasdaq & S&P 500, forming the bearish head & shoulders formation, a possible signal that the bear markets are a-comin’.

But before we go on to confirm what the others are saying, we have to step back and take a look again at the three major indices to see if indeed they are due for a bear market by using one of the Dow Theory tenets.  One of the tenets that is perfect for this situation is that the averages must confirm each other.  This means that no important bull or bear market signal could take place unless the averages gave the same signal, therefore confirming one another.

Keeping that in mind, let’s take a look at how the DJIA & the broader based S&P 500 are doing.

As we see on the charts, the DJIA has a neckline that is drawn slightly downwards.  At the same time, the right shoulder’s peak is lower than the left shoulder, thus somewhat confirming that there is weakness in this index.

The S&P 500 also shows the same characteristics.  It has a right shoulder forming at the moment and the peak is lower than the left shoulder.  Its neckline is also very similar to how the DJIA is formed, it is drawn slightly downward, therefore showing us a perceived weakness prevailing in both indices.

But wait a minute!  Something is off here as only these two indices are the ones showing the similarities.  The Nasdaq is a bit different.

Nasdaq is showing us a neckline that is drawn slightly upwards while at the same time, the supposed right shoulder has already created a peak that is already higher than the left shoulder.  Should this be a sign of weakness, then the right shoulder’s peak shouldn’t be higher but lower.

Due to the difference we pointed out, we already could not confirm that all the indices are showing the same signal.  The tenet said that in order for a bull market to be confirmed, the averages must exceed a previous secondary peak.  In this case, one index is not showing that.  When the averages diverge from one another, we have to assume that the prior trend is still intact.

To put things in a simpler perspective, we can not confirm any pattern until certain trendlines are broken.  There is always a possibility that perceived formations may turn into something different and those could give us different implications.  In short, many perceive that the three indices are giving us bearish head & shoulder patterns but we can’t confirm that until the necklines are broken convincingly.

However, that’s only me talking as I try to understand what is happening based from what we understand from the Dow Theory.  If you feel that our observation here is erroneous, please tell us why you think otherwise.

The Philippine Stock Exchange Index (PSEi) has been trying time and again to break the resistance currently found at 3365 but still without success, at least, not the past week.  However, if we look at how the index has performed lately, we could see that it has been retesting the resistance at least 3 times and its perseverance may pay off soon.

Unlike the US market, the local index has been doing much better than its American counterpart.  The DJIA and the other major indices in the US have been performing under their respective moving averages which doesn’t give it a strong sign but locally, the PSEi has been doing very well as the index continues to stay above the 3 moving averages.  In fact, some can even view the PSEi to be traveling inside an upward channel and it’s now testing the resistance that we mentioned earlier.

The MACD also confirms that the local index is in a bullish mood as the lines continue to rise above the zero line.  So we have three signs that the PSEi is still doing good; retesting the resistance at 3365, index staying above the 3 moving averages, and the MACD continuing its rise above the zero line.

Should the index finally break through the wall at 3365, we could see it rise to an upside target of 3546.

Recommendation: Wait and see
Resistance: 3365