FKLI - 11/5/09 - Back to business

After stalling for the previous week, the market resumes its prior trend and got higher. I got cautious because of the stalled trend last week and set a stop at 980 which was not hit but instead it goes higher and broke 1003. Now the Stochastic oscillator has gone back to positive and both the ADX and the MACD have started rising again. This is usually where many market analysts got it wrong because the moment they see the Stochastic or the RSI went above the 80 signal line , they call the market "overbought" and expect the market start falling. As I have mentioned here several times, once the ADX is rising and stay at high areas (usually >30), we would rather look at the MACD than the oscillators as their intrinsic weakness which render them quite useless in a powerful trending market. Thus they may remain "overbought" for days, weeks and even for month and price will keep reaching new highs.


The weekly chart is getting more and more bullish as the MACD is now above its zero signal line which is usually a more reliable buy signal. And now there may be another major buy signal coming in force and that is the rising D+ may be crossing up the ADX. This is usually taken as another major buy signal. Since the weekly prices also maintain above the upper Bollinger Band, I have nothing bearish to comment on this chart.

As price remains above the upper Bollinger Band, I shall place my stop at 1006 and I am looking at its next upside target of 1060. Unlike the DJIA, since Kloffe's weekly chart did not register any prior divergence before the current bull rallies, I cannot say that this bull rally is the beginning of a brand new bull cycle, but I remain cautious that this may just be a wave B correction up cycle in a major bear cycle (right side at the attached diagram) . If I am correct in my reading, then we should expect one more round of nasty sell down sometime in the near future before the sky is fully cleared.