Market headed for more turbulence this week

The local stock market could be in for more turbulence this week given the skyrocketing prices of oil worldwide, rising inflation and the peso’s depreciation against the dollar, traders said.

Last week, the main composite index shed 137.74 points or 4.72 percent week-on-week to 2,777.93 as inflation worries prompted foreign funds  to unload their holdings here.

“The market is in very bad shape from a fundamental and technical standpoint.  Medium to long term technical indicators have turned sour in  the last couple of weeks,” AB Capital Securities said in a report.              

“In terms of sentiment, there was no indication last Friday that the market can move up significantly. Foreign funds were dumping almost indiscriminately even as the major markets in Asia were rallying. Such  relative weakness argues that the PSEi could be vulnerable to break its  double bottom. Until things do settle down, we don’t see any sustained rally in the market,” AB Capital added.

Investors are expected to remain on the sidelines as they await the US  Federal Reserve’s decision to cut interest rates anew.

“The market is expecting an 80-percent chance that the Fed will  cut interest rates by 25 basis points. This could possibly be the last time the US central bank will be cutting their benchmark rates. This could help ease inflationary pressures as speculative traders in the commodities market may start to dispose some of their dollar hedge positions,” AB Capital said.

In another report, Spencer Yap of BPI Securities said share prices may see a technical rebound but this will likely be brief and will not be sustained.

“There could be a bounce but it would be only technical with investors taking positions because they have fallen so low,” he said.

“The market has been correcting so short-term traders will find opportunities,” he said.

But he warned that like previous recent rebounds a bounce back would not be sustained.

“Sentiment has been very weak. There are still some concerns about the US market, about commodity prices, oil prices, so the confidence is not yet quite there,” Yap remarked.