Stock Action March 30, 2010

It's been another thin volume trading day at the PSE with volume staying just a little over a million shares traded for the day. The action overnight at Wall Street provided some guide on where the PSE headed today.

The index's key resistance level at 3200 is now breached and from this platform the market will now decide if it still wants to go up or undergo a correction (which I estimate to have a 50:50 odds). The level of 3200 now means that our index is just about 5-6% off its all time high last 2007. And that will be the next level of resistance (3350-3400).

Tomorrow's trading can go both ways. You can take profits ahead of a long vacation. Or you can increase your positions anticipating a good earnings season by next week.

Regarding the risk of a correction, I turn to the VIX for clues. The CBOE VIX is still at complacent levels (below 20). While a lot would look at this as a sign of generally 'calm' markets, I see this as a clue of the market's waning libido and could be the precedent to a short term sell-off or correction (when the VIX hits below 16?). And a sell-off in the US would eventually translate to the same course locally.