Is a Recession Coming?

Is fear in Recession Increased in International Market?

The PSEI was ranging between 7400 to 8000 from February this year until there was a breakout of 8000 last June 2019. Then, PSEI did not go down below 7875 level and even did a breakout and went to 8400 last July 2019.

However, during the time when everyone is celebrating and shouting that the PSEI is bullish, bull run, the supposedly bullish month became a selling signal to everyone and the market has been down since then. Now the market is trying to sustain the support at MA200 on both Daily and Weekly Time Frames. If the market can sustain the 7600 level, we can expect that it will range for a while and will try to break the resistance at 8000 level again. This could be a range of trading opportunity.

However, if we put into consideration of the global events like the trade war and increasing concerns on a possible recession, and the Ghost month, we are most likely to revisit 7400 area and/or 7300 area because those areas are the market’s stronger support. There are few questions running into my mind when I read news about a possible recession:

– Is it possible that the recession is coming and that the PSEI is already going there?

– How can we protect ourselves during a recession if ever it will happen?

– What should we do if there is a recession?

Even Mark Minervini tweeted about a recession. He says, “Everyone is worried about a recession. You don’t need a recession to have a market slide. We have seen some meltdowns occur without a recession.”

As they say, anything can happen in the stock market and we cannot predict where the market will go. We can only base our forecast on probabilities by using some indicators. The market can be bullish for some time but since we have a market cycle, it can also be bearish for several times and/or sideways. Why bother about the recession?

Yes, there is always a possibility of recession because market movements are based on emotions of traders and investors and it already happened before so it can possibly happen again. If there will be a lot of sellers and only a few buyers in the market, then the price will go down for sure. We cannot protect ourselves in times of recession if ever that will happen, however, we can minimize the losses by selling your positions as quickly as possible. We can only protect our portfolio in cases of the bearish market by cutting our losses. Analyzing the market itself before jumping into buying stocks based on stock charts only.

You should always be mindful that the Market trend should always be put into consideration before buying a stock. Always protect your capital because as long as there is still capital left in the portfolio, we can still recover what was lost. Your portfolio is your lifeline as a trader. After selling your positions during a market crash, we should watch and wait for price stability. Check if the market will establish on a support area and that is the time we can already buy. Then there is an opportunity to gain.

My personal opinion about market recession is that the market will always go where it wants to go. As traders, what we can only do is act according to what the market dictates us to do. If it says it is time to buy, then let’s look for buying opportunity. If the market shows that it is already profit-taking time, then we have to take some profits. Easy to say but hard to do, yes it does. But experience will help you become a better trader. 

Here are some recent articles about the market recession:

(1) https://www.reuters.com/article/us-usa-economy-watchlist-graphic/predicting-the-next-u-s-recession-idUSKCN1V31JE

(2) https://www.forbes.com/sites/lisettevoytko/2019/08/13/three-reasons-recession-fears-have-suddenly-increased/#56c948b1bb72

(3) https://foreignpolicy.com/2019/08/13/argentinas-stock-market-decline-is-among-the-worlds-worst-since-1950/

For PSEI’s recent status, we have to be mindful that we are ranging for a few days. The index is trying to sustain the 7600 support area but it is also consistently creating lower high. The market’s range is quite wide as well as each of the candle. Though Philippine’s economy is doing good, we are very much affected with global issues since there are still few Filipino stock investors so the market is actually controlled by foreign investors and institutions. Experts would even check NASDAQ, DOW Jones, etc. first so they can predict the probable movement of PSEI.

Volatile movement of PSEI is very much evident for several days so we can be whipsawed in a few trades. We should try to buy close to support and have an extended cut loss point so we can at least minimize whipsaw. Try to prioritize weekly chart trend on buying stocks for position trading or swing trades. There are few stocks that are showing strength even though the market is weak. So you might consider buying those stocks. We also have to check or wait for 2nd quarter FS of companies before buying the stock since it will greatly affect the movement of the stock.

PSEI Chart, we are now almost 10% down

There will always be an opportunity in the market. It only depends on your ability to find it. So the best defense is still knowledge and skill. Always improve yourself and always try to become a better trader than yesterday.

More from Sicilian Trader

A Glimpse to My Whipsaw Trade

Have you heard the song “Watch Me (Whip/Nae Nae)” by Silento? The...
Read More

Leave a Reply

Your email address will not be published. Required fields are marked *