PSE Index

From an all time high of more than 5,300, the Philippine Stock Exchange Index plunged back down to as low as 5,158.14 (May 11's close). This could be viewed as a healthy correction as most index and non-index stocks have already gone up significantly prompting people to take profits.

However, aside from the profit taking, PSEi's plunge was also probably caused by several reasons.

*JPMorgan (JPM) reported a $2 billion trading loss and in the process, has lost $15 billion of its market value. Fitch Rating has lowered its rating for JPMorgan from F1+ to F while Standard and Poor's (S&P) has cut JPM's rating from A+ to AA-. S&P has cited that there could be a possibility of broader hedging problems which the credit rater said isn't "consistent with what we have viewed as the company's sound risk-management practices". Federal Reserve officials are now conducting an investigation on the trade position that led JPM to such loss. JPMorgan is the largest and most profitable bank in the U.S. and its CEO, Jaime Dimon, has been lauded during the 2008 financial crisis after steering the company through the hard times without reporting losses.

*Europe's financial woes is not getting any better. European stocks continued to fall for another week after political parties in Greece failed to form a government after its election raising concerns about the country's ability to implement austerity measures. Voters in Greece flocked the anti-austerity parties during the May 6 elections. Another election might be held again next month and the standoff has reignited the European concern over Greece's ability to hold to the two bailouts negotiated since May 2010 and has sparked the idea of the country leaving the euro.

*The tension between China and the Philippines over the Scarborough shoal is not getting any better. Chinese agencies has suspended travels to the Philippines and advised Chinese citizens in the Philippines to avoid conflict with the locals (Filipinos). China also accused Philippines for escalating the already tense territorial dispute over the South China Sea after a noisy but peaceful anti-Chinese protest in Manila. In addition to suspending travel to the Philippines, China has also imposed stricter implementation on bananas, pineapples, and other fruit imports from the Philippines.

JPMorgan's shockingly poor performance and the worsening Greece and European crisis has pushed Dow Jones to perform poorly. The tension on China on the other hand has caused concerns and affected several business ties with the Philippines. Nothing is more hit badly than the mining stocks, particularly nickel. Philippines is one of China's top nickel supplier and after Indonesia has stopped shipping low-grade nickel, Philippines has earned the lion's share.

Will this change the current sentiment (uptrend)? Philippine based companies continue to hold strong outlooks and in fact most stocks are still considered undervalued. The PSEi weakening might just be short term and will open more buying opportunities and send stocks back down cheap.

Below is PSEI's chart.

PSEi is currently on its trend support and very near its 32-day SMA. If the rift between China will no longer get worse, PSEi ma bounce back up anytime and hit a new all time high.

Mining stocks, though most are cheap, are something to be avoided as of the moment not until the sentiment returns. NI has already recovered but momentum is still not strong. ORE, MARC, and DIZ have corrected heavily and are cheap increasing their growth and momentum potentials.

Other sectors worth looking are the holdings, properties, and financial sectors.