FKLI:- Market Getting Panicky - 8/1/2011

 

After taking a breath 2 weeks ago, the market continues the selling again last week. Price went below the lower Bollinger Band again. Even the Stochastic did not follow suit and turn negative at first, but the MACD is still negative, so I took on new shorts positions. The MACD is now crossing down its zero signal line, which is considered as a more confirming bearish mode. Please take note that the ADX has begun to rise, indicating there is a new trend in this market. With the ADX coming into prominence, we should place more weight on the MACD rather than on the Stochastic.

Place stop at 1558.

 

The weekly chart continues to deteriorate towards the bearish side. The Stochastic is crossing down its 80's signal line and the MACD has also crossed down. The DMI is also bearish, so we have all the 3 indicators bearish. Price is just holding above the middle Bollinger Band which is effectively a 20 periods moving average. If this level is broken in the coming week, it would mean more selling coming out.

As I  have warned on several occasions before, we may be witnessing another bearish divergence forming in the daily and weekly chart. Now it has came to fruition. This is really bad news for the bulls in the equities market. If prices are to break below the lower Bollinger Band, we would probably see a bloodbath in the market. But as for the futures market, it is time to make some respectable profit.

Now that everybody  start to pay attention to the US debts ceiling crisis and they are getting increasing panicky. But rest assure that this whole fiasco is nothing more than a wayang kulit keenly played out by both the 2 political parties in preparation for the coming election next year. The hard fact remains that the US Treasury is not going to default in August, nor in subsequent months for that matter. An estimated $172.4 billion of tax revenue next month is more than enough to cover the $29 billion of August interest payments. For fiscal 2011, which ends Sept. 30, the Treasury is expected to take in revenue of $2.2 trillion, while only $214 billion is needed to service the debt.

And even if it lacks the authority for new borrowing, the US Treasury can continue to roll over existing debt. But financial markets always make use of smokes and mirrors to bring on major market reversals. So you must learn to NOT to be misinformed and not to be afraid.