FKLI -29/6/09 - Market may go range bounding

Last week I noted the weekly chart was not complimenting the daily chart's multiple sell signals and the negative MACD was still too "far" from its zero signal line, so I said that I would NOT engage in too big a sell position. The market did went down further on Monday and immediately staged a reversal on Tuesday. On Wednesday it managed to close back above the lower Bollinger Band which would effectively close off all our prior sells positions. Though we usually take this cross up above the lower Bollinger Band as an initial buy signal, I must advocate a little caution here again as it is NOT confirmed by other indicators. And Friday candlestick is a spinning top which is usually a sign that the market is losing momentum.

As the ADX has been falling and also the Bollinger Band has started to squeeze. Both these may be telling us that this market is going into a range bounding situation. So you should trade small on whatever signal that comes along. Last week someone released a report saying that the foreign funds are net buyers of the local equities which is a supposedly news, but as the previously highlighted bearish divergence is still valid, I would not believe in any return of the bull story unless prices manage to close above its previous high and stay above there at least 2-3 days.


The weekly chart as per last week's , though price briefly went below the upper Bollinger band it but still managed to close above it again. The MACD also remain positive and the Stochastic still has not crossed below its 80 signal line, so nothing here suggest the bull cycle is over yet.

So the game plan for the coming week is to trade small on any new end of day signals or just stay out before a more concrete signal comes along.