Analysis of Stocks, Markets & Commodities

http://www.businessmirror.com.ph/08142008/opinion02.html

I was surprised that John Mangun who is a respectable columnist of Business Mirror visited my website and even emailed me. Anyway I just like to share the things that John Mangun and I discussed  in our email conversations last week so that the readers of this website will be educated as well. He is one of the few people who said that oil has was topping when it reached 145+ levels and well... BULLSEYE! Right on the target! You can read his collumn in Business Mirror every Tuesdays and Thursdays.

Here's some or a glimpse of our email conversations (with his permission):

_______________________________________________________________________________

Mr. Yap,
I respect any man who takes the time to analyze and not simply ‘talk’ the markets. You most certainly qualify. I take exception though with several of your points. Always, you must justify the parameters of your MA numbers. Simply using citisec’s default does not qualify. I would suggest you look at 20-40-80 on the daily chart that has given much more accurate buy/sell signals than the defaults. you will notice on the weekly using these numbers that it rests right on the bottom of the gap, which of course will be filled. on the daily, the 80 day MA rests right at the top of the gap. between the two we have a clear support and resistance when the gap is filled and cautions us against a downward break and verifies an upward breakout. monthly MAs are harder. however looking at 3-6-12, we find a slight upturn but no confirmation of a buy until 3000 is breached which is not exactly rocket science. trying 2-4-6 or 8 on the monthly shows a different proposition as here we have a buy signal and a break above the 6 on the MA above 2750. therefore, i am convinced and still  hold with my public contention (http://businessmirror.com.ph/08122008/opinion04.html) that this has been a correction in a long-term bull market that has much farther to run. You are correct that the RSI appears to be oversold as well as the MACD (using the defaults). However, both the weekly and the monthly charts tell an entirely different story. Here we are seeing only the beginning, particularly on the weekly, of a long term buy signal and I believe that this is much more important than the daily. Further, the weekly clearly shows that the market PSEi RSI is neutral at best and that the MACD has just now given a buy signal. Of course, your audience is geared towards a day trading mentality and there is nothing wrong with that.
Two other points. I see little if any greed in the market except on the part of some day traders. ‘Investors’ are still scared to death. As far as the foreigners go, my personal 15 year research shows that the foreigners get in near the top and out near the bottom. It most dramatically occurred in January of 1997 when foreigner buying was the highest in nine months. Further this time, their sell signal came at 2,500 about six weeks ago and buying at 2,400 was brilliant.
Thanks. I like your site. Keep up the good work and keep improving your tech skills. Guys like you are important to the future of the PSE>
Best regards
John mangun

_______________________________________________________________________________

Hi Mr. John Mangun,

     I completely respect your different views in analyzing markets and I actually follow your articles as well. I'm just a young trader and still needs to learn a lot especially from guys like you. I was satisfied with using 16-32-65-130-260 MAs since it was and is working quite well with my trading style which gives me more reason of using them. Regarding my greed and fear calculations, these figures are really for traders and only works for the short term only. I stated that greed was ruling in current market prices mainly because I think that the run up in prices was overdone and has not much basis on it except for the decline in oil prices. With regard to foreigners, I havn't experience the 1997 market or any sort since I was still in school during that time. Thank you for sharing the results of your research. All I knew about foreign hands is that they were considered as the "smart hands" and that they're the ones who move our markets. Since they're selling, then our market shouldn't have much legs to move upwards.. Well, not unless the wider picture suddenly changes. I do think though that global markets do not have the fundamentals or do not have much reason to move higher since China is about to slow down, Europe seems to do the same and India too. I think a consolidation is likely to happen first before we see PSE in 4,000.

     Thank you so much for taking time or even considering to look at my website.

Regards,
Wellington Yap

_______________________________________________________________________________

I totally agree that greed and fear move markets both short and long term, but it is short term greed and fear that move prices short term and long term = long term movements. the parameters that you use for tech are very important as the only purpose of tech is to generate accurate buy and sell triggers. of course, the 'experts' ALWAYS look to the foreigners. it is easier to say that than to do any real analysis but when it comes to long term near-tops and bottoms, the foreigners are always, always wrong. sure we will have consolidations on the run to 4000. i already i am getting emails saying i am crazy to think we can ever reach 4000, but that is what the techs show. and the techs are never wrong; only the interpretation of them is what causes trading failures. my words of "wisdom"; forget about fundamentals when looking at the broad markets. money flows like water downhill into investment vehicles that make money. money does not understand fundamentals. it only understands trading opportunities. look at gold. there is no fundamental reason why gold should not be $1000 right now....except, people are selling instead of buying. there are only five basic investments: real estate, equities, commodities, gold, and debt instruments. 'fundamentally'  one may be better or worse than another, BUT money flows into the area that there is no money like water into an empty hole. what does everyone hate right now? Real Estate maybe? that is an partially empty hole. find the empty hole that will eventually be filled  and you will be rich. this is a variation on the greed and fear principle and 'greed and fear' trading will make you rich.

regards
John Mangun

_______________________________________________________________________________

I then asked him these questions:

You mentioned that oil has topped at $146 $147 / barrel already and that it may trade at 60-80/barrel by year end. Although we both share the same view that it has topped already (at least in the next 12months), I'd like to know comments from you on those people who say that oil still has a lot of room to go much higher because this will bring new and big investments to renewable sources of energy. Isn't it true that as oil goes down, the world will start consuming more of oil again and because of that a new cycle of heavy demand and tight supply will form (another wave of higher oil prices) and this will not stop ONLY if we have enough investments in renewable sources of energy such as wind solar etc. Is it not true that for us to achieve a stable and low oil price, we need to see these investments (aside from conservation) and for us to get these kind of investments, we need to see very very high oil prices. What is your take on this issue?

I also would like to know what made you think that the PSE would reach 4,000 over the next 12months? Yeah sure we have OFWs fueling our economy but would that be enough for an average family size of 6? Malls are always on sale these days and people aren't still flocking to malls compared before. This is my own observation only. I guess my question really is, what do you think will be the main catalyst to drive the PSE to 4,000?

_______________________________________________________________________________

So far, this is his answers, I think he's a little busy right now that's why he has nott answered my question on PSE's ride to 4,000 mark.

Nope. $60 -70 oil is just painful enough to keep alternative energy and conservation going GIVEN the current situation of the credit crisis, housing disaster in both the USA and Europe, and significantly higher commodity prices and the subsequent inflation. Again, we must look at the total picture and place oil prices in context.

financially speaking, $60-70 oil still makes shale oil etc viable again in the context of current government subsidies and tax benefits. plus, and this is important, once you have converted your SUV monster to LPG, you will NOT convert back to gasoline even if pump prices drop from Php60 to Php40 or less.