FKLI - Drifting Again But Expect Some False Breaks - 8/19/2013

The market came back from the holiday and show off with another false breakout move. Price went above the middle band where I had set my stop and closed off the earlier shorts position. I have expected this kind of movement would occur as the ADX has been falling and gone below the 20's level. The MACD and Stochastic are giving an extra confirmation of a listless market by contradicting each other. The Stochastic has turned positive and rising while the MACD remains negative. So is the DMI. The ADX has now just started to fall again. It is last at 18's.

It is because of all these confirmation of a listless market situation, I did not went in to engage any new trade. My thinking would be: since the MACD and DMI are negative, I would rather sell  when the Stochastic turns down again. Price is now inside the band, I would look for a breakdown below the bottom band or a breakup above the top band as my next signal to engage a new trade. Of course either of them would require a complimentary confirmation from at least one of the indicators.

 
Last week's sell signal did not get a confirmation as price failed to go below 1774. But I am having an agreement from both the Stochastic and MACD as the latter has finally turned negative now. Price went up and tried to go above the top band but it had failed and came back down and closed below the top band again. The usually slow reacting DMI remains positive. The ADX is also staying flat which is telling us that the market has not started any new trend yet and it is still confirming an end to the prior trend. But since it is above both the D+ and D- , I can say that the market is already overbought.

Though I cannot read any extraordinary bearish signs at the chart for now and I expect the market will continue to drift for a while with periodical false breakups and breakdowns. But I must emphasize that both the daily and weekly chart are now more in favour of the bears. And look out for a possible downgrade of the nation's economy from another source soon. A nation that obviously sinking deeper in cesspool but instead of governing , the people up there is now busying themselves with party elections.