Sri Lanka: All Share Index (ASI) crashes below key 200 day moving average

Today, 23rd June 2011 was a significant day for the Colombo Stock Exchange, when the All Share Price Index crashed below the key 200 Day Moving Average for the first time since rising above it on 18th May 2009 - the day before the war ended in Sri Lanka.

On 18th May 2009, the All Share Price Index surged by 123.23 points to 2,030.9, rising strongly above the 200 Day Moving Average which stood at 1,916.96 the previous day. Since this cross-over, the All Share Price Index has never looked backed, rising by a phenomenal 284% to a high of 7,797.96 on 28th February 2011.

Equity prices generally overshoot on the way up (and also down) exceeding fundamental valuations and it is likely that Colombo's share prices have been stretched in recent months. Further, with significant risks looming for the global economy in the form of the brewing debt crisis of the PIIGS in the Euro Zone, more pain may be in sight.

Cheers for the heads up! After a long time some really crucial news in here !

This is something that I was keeping an eye out for since early may. At least now no one can deny that it's a bear market and not a bull market. However the good news is that indices and shares usually rebound at or near the 200 day average. So watch out for a long green candle on friday or monday and if the ASI crosses above the 200 day average don't think the bear is dead. You ain't seen nothing yet.

tubal wrote:This is something that I was keeping an eye out for since early may. At least now no one can deny that it's a bear market and not a bull market. However the good news is that indices and shares usually rebound at or near the 200 day average. So watch out for a long green candle on friday or monday and if the ASI crosses above the 200 day average don't think the bear is dead. You ain't seen nothing yet.

Thank you dear Tubal

Nice post Quibit

What happened is happened....

What do we think we should do?

1) Dump rest of the things we got and wait till it recover?
or
2) make authorities aware of what is happening and make them to take correct action?

can we do #2?

tubal wrote:This is something that I was keeping an eye out for since early may. At least now no one can deny that it's a bear market and not a bull market. However the good news is that indices and shares usually rebound at or near the 200 day average. So watch out for a long green candle on friday or monday and if the ASI crosses above the 200 day average don't think the bear is dead. You ain't seen nothing yet.

Yes Tubal , having the "Great Bear" ( with no offence) is an assert as you have been saying about the bear trends from a long time.

Lets hope the ASI will not break 6800 heavily ( else it could get real ugly ) and market recover atleast for a short while.

Lets all of us divert positive energy

Thanks Quibi for bringing this point to the attention. Yes it is a crucial event for CSE. ASI falling below 200 day MA (which is a lagging indicator) confirms how bad is the recent fall. Let's see how the market responds to this event.

slstock wrote:

tubal wrote:This is something that I was keeping an eye out for since early may. At least now no one can deny that it's a bear market and not a bull market. However the good news is that indices and shares usually rebound at or near the 200 day average. So watch out for a long green candle on friday or monday and if the ASI crosses above the 200 day average don't think the bear is dead. You ain't seen nothing yet.

Yes Tubal , having the "Great Bear" ( with no offence) is an assert as you have been saying about the bear trends from a long time.

Lets hope the ASI will not break 6800 heavily ( else it could get real ugly ) and market recover atleast for a short while.

Lets all of us divert positive energy

Yes, tubal was warning this bear trend from long time ago. But no one didn't take that much serious. We would have been winner if we taken it serious. Hats off to you tubal for your forecast.

Monster wrote:

slstock wrote:

tubal wrote:This is something that I was keeping an eye out for since early may. At least now no one can deny that it's a bear market and not a bull market. However the good news is that indices and shares usually rebound at or near the 200 day average. So watch out for a long green candle on friday or monday and if the ASI crosses above the 200 day average don't think the bear is dead. You ain't seen nothing yet.

Yes Tubal , having the "Great Bear" ( with no offence) is an assert as you have been saying about the bear trends from a long time.

Lets hope the ASI will not break 6800 heavily ( else it could get real ugly ) and market recover atleast for a short while.

Lets all of us divert positive energy

Yes, tubal was warning this bear trend from long time ago. But no one didn't take that much serious. We would have been winner if we taken it serious. Hats off to you tubal for your forecast.

Yes slstock and Monster, when Tubal started warning about a bear market, I was only in the denial phase as he defines it. Now it is cristal clear that we are actually half way through in a bear market and things may have just started to get worse. Thanks tubal for those countless warnings and those who listened are in a better position.

I think bear market will change to bull market if SEC allows credit to the brokers. it is due to the credit restrictions that market become bear.
exceptional growth of CSE in 2009 and 2010 can be mostly attributed to the broker credits and increased investor confidence of finishing war.

econ wrote:I think bear market will change to bull market if SEC allows credit to the brokers. it is due to the credit restrictions that market become bear.
exceptional growth of CSE in 2009 and 2010 can be mostly attributed to the broker credits and increased investor confidence of finishing war.

so do you think 2009 2010 best performing stock market was created by debtors buying on credit from each other. so if we had proper credit regulations implemented in 2009 2010 we would not have to suffer today.

insidertrader wrote:

econ wrote:I think bear market will change to bull market if SEC allows credit to the brokers. it is due to the credit restrictions that market become bear.
exceptional growth of CSE in 2009 and 2010 can be mostly attributed to the broker credits and increased investor confidence of finishing war.

so do you think 2009 2010 best performing stock market was created by debtors buying on credit from each other. so if we had proper credit regulations implemented in 2009 2010 we would not have to suffer today.

Credit also one of the reason for the huge up in the market

If these credit restrictions had been there from 2009, ASPI would not have reached to 7500+ level but it could have shown a steady growth and there would not have been overnight-millionaires and billionaires. That steady growth could have been a positive reflector of overall economy's growth and sustainability.

What has now happened is rules have been changed with a speed more than required while there is no inducement for new crowds to invest in the share market while all inducements that existed have been muted.

Further, brokers has changed their mood from being ethical advisers to street hawkers who exchange gossips and rumors. This way is their final resort to cover monthly targets at the cost of innocent investors.

insidertrader wrote:

econ wrote:I think bear market will change to bull market if SEC allows credit to the brokers. it is due to the credit restrictions that market become bear.
exceptional growth of CSE in 2009 and 2010 can be mostly attributed to the broker credits and increased investor confidence of finishing war.

so do you think 2009 2010 best performing stock market was created by debtors buying on credit from each other. so if we had proper credit regulations implemented in 2009 2010 we would not have to suffer today.

Yes. (+ rep)

Hiru wrote:Further, brokers has changed their mood from being ethical advisers to street hawkers who exchange gossips and rumors. This way is their final resort to cover monthly targets at the cost of innocent investors.

Strongly agree! We can see many shadows of such brokers on this forum it self.

econ wrote:I think bear market will change to bull market if SEC allows credit to the brokers. it is due to the credit restrictions that market become bear.
exceptional growth of CSE in 2009 and 2010 can be mostly attributed to the broker credits and increased investor confidence of finishing war.

I thnk T+5 day rule is the worst as it causes the forced selling and bring down the market.
If credits are allowed without much restriction market will have a bull run.
If credits are totally cancelled market will move up slowly...at least it will not come down like this.
With this T+5 day rule we can not have much hope.

This is a very gloomy situation. There are no fresh funds being infused to the market. Broker credit create artificial gains and has to be totally ruled out as a mean of resurrection. Market will come down further whether one likes it or not

Many institutions which posted healthy profits from capital gains in 2010 are threatened to be exposed with considerable capital losses in 2011. There is a real danger of the market going well below 6,000 to touch 5,000 scale points within the next 3 months

Friends,

It seemed that regulators have NEVER EVER ANALYSED the market before bringing in new rulings with regard to the funding availability in the country. No constructive thinking what so ever. Aren't there any advises/consultants for them to get advised.

Yes , I too agree T+5 has become a devil. Stock price is continuancely dropping mostly because of force selling. If authorities allow Credit to be given by brokers according to their own criteria(may be with very lmited intervention ) market would have been performed better.T+5 effect is there now every day.

In any business credit is playing an important role. In any country wholesale business is not performed well if credit system is not there. Mostly in 4th cross street,Colombo credit is given without any document.If authorities deccide to stop credit sale in commodity market what will happened in the following day? market would definetly collapse. The same theory could apply here too.

I think this is the rime to review all such regulations adopted recently and take decision to put the market in right direction if they realy want to see improvement in the stock market and thereby establish good capital market in the country.

This is Sri Lanka. How many qualified people in respective fields are in the right positions? Just start thinking from the top.

Also, we have people at the top who purchased shares at 6 and sold to other at 14. If this was a developed county those people are already in jail.

This is Sri Lanka.

rijayasooriya wrote:

econ wrote:I think bear market will change to bull market if SEC allows credit to the brokers. it is due to the credit restrictions that market become bear.
exceptional growth of CSE in 2009 and 2010 can be mostly attributed to the broker credits and increased investor confidence of finishing war.

I thnk T+5 day rule is the worst as it causes the forced selling and bring down the market.
If credits are allowed without much restriction market will have a bull run.
If credits are totally cancelled market will move up slowly...at least it will not come down like this.
With this T+5 day rule we can not have much hope.

agreed.. T5 is the worst case.

but according to the fundamentals and future value of all the stocks in CSE, what is the accurate ASI roughly, since present ASI is a credit given value??? SEC stood high when CSE was the worlds top market. unfortunately it was riding with huge credit. The Market Capitalisation of the CSE stood at Rs. 2,210.45 Bn as at 31st December 2010. but how much credit was there???
[Mr. D Perera's portfolio was around RS 120 Billion if i am correct. wow]

econ wrote:

rijayasooriya wrote:

econ wrote:I think bear market will change to bull market if SEC allows credit to the brokers. it is due to the credit restrictions that market become bear.
exceptional growth of CSE in 2009 and 2010 can be mostly attributed to the broker credits and increased investor confidence of finishing war.

I thnk T+5 day rule is the worst as it causes the forced selling and bring down the market.
If credits are allowed without much restriction market will have a bull run.
If credits are totally cancelled market will move up slowly...at least it will not come down like this.
With this T+5 day rule we can not have much hope.

agreed.. T5 is the worst case.

http://www.investopedia.com/terms/s/settlement_period.asp#axzz1Q9unmWEu

In the U.S., the settlement date for marketable stocks is usually 3 (three) business days after the trade is executed, and for listed options and government securities it is usually 1 (one) day after the execution.

Do you think we should implement the T+3?

@slstock, @monster, @stockswatch oh shucks :blushes:

hiru wrote:If these credit restrictions had been there from 2009, ASPI would not have reached to 7500+ level but it could have shown a steady growth and there would not have been overnight-millionaires and billionaires. That steady growth could have been a positive reflector of overall economy's growth and sustainability.

What has now happened is rules have been changed with a speed more than required while there is no inducement for new crowds to invest in the share market while all inducements that existed have been muted.

Further, brokers has changed their mood from being ethical advisers to street hawkers who exchange gossips and rumors. This way is their final resort to cover monthly targets at the cost of innocent investors.

Right you are Hiru! The ASI tripled from around the time that the war ended to OCT 2010, creating a bubble! Dr Harsha de Silva named it as such and was called all sorts of names by the dumb money which was then at investnow. The Famous technical analyst who can't even spot a head and shoulders called him a traitor and a sabatuer.

The government to it's credit belatedly realized that there was indeed a bubble (maybe thanks to input from Dr Harsha) and took steps to remedy it. The 10% limit, the credit clearing rules (and their relaxation later), limitations on bank guarantees and banks exposure to stock markets, forcing EPF and SLIC to buy overpriced shares were all part of the process.

rijayasooriya wrote:I thnk T+5 day rule is the worst as it causes the forced selling and bring down the market.
If credits are allowed without much restriction market will have a bull run.
If credits are totally cancelled market will move up slowly...at least it will not come down like this.
With this T+5 day rule we can not have much hope.

So do you want the bubble to be recreated? Do you want the kind of bubble bursting that happened in Japan to happen here (refer Econ's comments on another thread). Forced selling has been discussed over and over again. IT'S NOT HAPPENING. If your stupid broker says it's happening ask him to name the company that's doing the selling. Then call that company and ask them if they really are doing it.

rajithasamaranayake wrote:This is a very gloomy situation. There are no fresh funds being infused to the market. Broker credit create artificial gains and has to be totally ruled out as a mean of resurrection. Market will come down further whether one likes it or not

Many institutions which posted healthy profits from capital gains in 2010 are threatened to be exposed with considerable capital losses in 2011. There is a real danger of the market going well below 6,000 to touch 5,000 scale points within the next 3 months

Right you are. Last year when we cautioned against companies that reported massive profits through capital gains we were laughed at. Now some of those same companies are getting hammered. It's going to create a vicious cycle and drag the market a long way down. Proof that dumb money still dominates the market is in the fact that people are outraged at capital alliances sell recommendation on Sampath and the fact that people bought heavily into ALLI - whose profit was mostly from capital gains.

duke wrote:
http://www.investopedia.com/terms/s/settlement_period.asp#axzz1Q9unmWEu

In the U.S., the settlement date for marketable stocks is usually 3 (three) business days after the trade is executed, and for listed options and government securities it is usually 1 (one) day after the execution.

Do you think we should implement the T+3?

Good one duke!!