Trading kicked off to start the new week with the stock board blazing red, moving against the U.S. market's upbeat close on Friday night. The index plunged as deep as 1,594 points, and although it managed to close back above 1,600 points, there is a real possibility in the near term that it could break through that key support level once again.
Throughout the past three weeks, the index has been treading water around the 1,600-point range, lacking any guiding factors or fresh positive news to provide a stimulus. Although foreign investors continued to buy, they were unable to push the index any higher.
This is because large-cap stocks across various sectors have become saturated — prices had already risen substantially beforehand, leaving their fundamentals increasingly fragile. Delta Electronics (Thailand) Public Company Limited, or DELTA in particular, has been drifting lower.
When foreign investors turned around and began selling off, it added pressure that triggered a market correction. On Monday, they sold off 3,680 million baht worth of shares; large-cap stocks fell in a broad retreat, dragging the index down 12.73 points to close at 1,601.05 — barely managing to hold above 1,600 points.
The Middle East war situation remains uncertain. Crude oil prices in the global market have begun to soften, which should be a positive factor for stock markets — yet the Thai stock market failed to respond accordingly. Institutional investors, broker proprietary portfolios, and foreign investors all sold in unison, to the point where the short-term trend may be shifting into a "downtrend" after three weeks of sluggish, grinding movement.
Analysts at several brokerages may be looking at things through rose-tinted glasses, revising their earnings-per-share forecasts for listed companies upward and raising their year-end index target estimates to above 1,700 points. But the short-term trend for stocks is beginning to look unreliable. The 1,600-point support may not hold, and there is no way to predict just how deep the correction that is now beginning will take the index.
Nor is it possible to know how heavily and how persistently foreign investors will continue to sell.
Retail investors may be feeling optimistic, assuming that Monday's correction will be short-lived, and have rushed in to snap up shares on the dip. If the market re-enters a full-blown downtrend or correction phase, however, those retail investors who bought on the dip may be in for serious pain.
The major uptrend cycle may have already run its course after the end of last July, while the "downtrend" phase is now slowly creeping in to take its place — and this will present a good opportunity for investors waiting to buy at lower prices.
Hold your cash tight, wait for the right moment. This cycle, you can definitely accumulate shares at a lower cost.
