FKLI:- Is The Market Getting Ready To Blow ? - 5/23/2011

Prices did not go anywhere for the whole of last week. This is expected when the ADX remains flat at 11's. Though our stop is not hit yet, but I am up on my toes as the Stochastic has now reached the overbought zone. Stop should be kept at previous day low minus 1-2 points.

The weekly chart is a classic example of a trendless market. First there is the contradicting positive and rising Stochastic and the falling negative MACD. Then there is prices getting caught within the upper and lower band. And the band continues to tighten while the ADX continues to fall. It has now reached an unusual low of 10's. Even the DMI has begun to wiggle.  We cannot find a more perfect example of a listless market. Similar setup is also showing up in the 30 minutes chart.

All these are also great indications that this market may soon explode. So our job is to keep a watchout for this possible explosive action and try to determine its direction.  As mentioned in previous week, there is a presence of a bearish divergence at the weekly chart, so my bet will be on the sell side. Meanwhile keep the trading size small to avoid whipsaws.