FKLI:- Has The Mother Of All Bears Arrived ? 5/7/2010

My stop at 1328 was taken out last Monday but I did not reverse to buy again as the Stochastic remained negative. Instead I went back into shorts when prices went below the upper Bollinger Band  on Tuesday. On that same day, we have the D- crossing down D+, a lower low on the next day confirmed Wells Wilder's extreme rule for selling. Then on Thursday we have the MACD turning negative which added on another sell signal. By the coming week, any cross down below the lower Bollinger Band would flash another sell signal. And you should watch out for the MACD when it crosses down below its zero signal line and when the Stochastic crosses below its 0's signal line, both should bring out more intense selling.

With all the sell signals, what we lack is the 'easterly wind" which is the flat ADX, once we can see the ADX starts to rise and especially when it goes above the 20's, then we can safely say that the bear cycle has begun.


Another method to look at the return of a trend is to watch out a rising D- that break up above its prior peak which is marked out here.


Since the ADX is flat and lowly, I would concentrate on the Stochastic for possible reversal. Place stop at 1328. If prices continue to fall on the coming week, move stop to 1311.

The weekly chart is still full of uncertainty as the Stochastic is positive when MACD is negative. As you should have learnt from reading this column:- contradicting indicators mean the market is sideway and has not decided on its next course of direction. This is further confirmed by the falling ADX which is dangerously near its 20's. Prices getting stuck within the upper and lower bands also confirm the lack of trend here.


Things to watch out for at the weekly chart will be a closing of below the lower Bollinger Band at 1286 or the Stochastic starts to cross down which may make it in agreement with the MACD.

As mentioned here last few weeks, there is a bearish divergence found at both the daily and weekly chart and a Head and Shoulder pattern already formed, basically we have got all the mothers of all bears sitting in place. All we are waiting for next is their confirmation - a break in the H&S neckline, prices going below the lower Bollinger Band; MACD going below its zero line etc, then the party should begin.If you believe in the arts and science of technical analysis, then you would NOT get fooled by the politicians' spin doctors telling you how beautiful is our economy.


We need another cycle of nasty sell downs before we can enjoy our next super cycle of bull market. I always feel strongly about it:- come on, get on with the pains now instead of dragging on forever and ended up in decades of self pity and limping steps. If you look at how Thailand and Indonesia embraced their pains after the 90's crisis and boom to a new height and compare them to Malaysia, you would know what I mean.