XTR – Peaks and Bottoms

When prices rise, 80% of the market components rise together and when market falls 90% of market components fall together. This is a phenomenon witnessed world over across markets and across assets. We witnessed this in Romania from July 2007 when a majority of market components declined together.
This issue of XTR analysis the erosion in market capitalization across the market to look for the above mentioned trends and seasonalities. The objective is to identify the stocks, sectors and indices that eroded the most in value and to drive cues for stock selection based on results.
A majority of the market peaked in July 2007. But there were some exceptions like Policolor which was making historical highs in Jan 2008 when markets were falling. This clearly talks about an underlying interest and strength in the stock. PCL is not a part of XTR 21. On the other hand there were stocks which made new historical lows. This was owing to short trading history like Alumil and Flamingo, but also because there are some market component like Altur Slatina, which never participated in the market rise and are undergoing a multi year stagnation. All of these exceptional stories can not be valued on the same scale and needs further study.
The other interesting part to watch was the bottoms. A majority of the market bottomed in 2000. And it was not until FEB 2008 that we saw 4 stocks bottoming just in the first two weeks of Feb 2008. This could be interpreted in many ways. One that we really are at an oversold extreme and second if we see more stocks bottoming in March we could be in for a multi month bounce. And even if prices retrace half of the fall from July top we have a 100% return from respective lows. What happens however, remains to be seen.
Eight of the top ten losers did not top in July 2007 but starting 2005. And despite the fact that Financials took a sizeable hit there were two financial majors in the worst losers viz. SSIF Broker and Bank of Transylvania. The report comprehensively analysis the overall market in terms of percentage losses and value of market capitalization erosion.
The last 7 months eroded nearly 40% of the Romania market capitalization at about 12 billion Euros. With BETFI contributing 12% and BET-C the rest. The XTR 21 Index we launched early Feb 2008 had a mixed week with 12 stocks down, seven up and 2 unchanged. Overall, the XTR dropped 5.6%.
March 2008 remains a key month for anticipated bottoms. How the market components perform will suggest the trend for next few months. At this stage we just have signatures that we are near an oversold extreme, which could prove to be a low risk entry point in contrast to the July 2007 entry point which was marked by excitement and euphoria.
To read the latest XTR issue write to us for a free trial today or download the report from REUTERS KNOWLEDGE, YAHOO FINANCE, THOMPSON ONE or THOMPSON RESEARCH.