FKLI:- Prepare For A Coil Spring effect - 5/16/2011

 

My stop of 1518 was hit on last Monday. I was not too convinced on the previous week's down move as the ADX failed to confirm a new trend. Once again the market has moved on an opposite direction. I had bought on last Wednesday when price closed above the upper Bollinger Band with a positive Stochastic. But as the ADX continues to go down again . This time it is flat at 11's. So again whatever my trade is, it should be a short term based. But I notice there is a minor bullish divergence at the Stochastic , so maybe we would have a more profitable trade this time.

My stops would be at previous day low minus 1-2 points or the upper Bollinger Band support of 1531. I am mentally  prepared for more whipsaws.

 

The weekly Stochastic has begun to hook up, but it is still negative and so is the MACD. Prices stay inside the Bollinger Band which is also complimented by the falling ADX. As the ADX has now fallen to 11's, this is a classic confirmation of sideway market.

Both as the weekly and daily ADX confirm that there is a classic trendless market, so either you stay aside or you would keep tight stops and trade very short term. The past 3 months of non-directional price movements is slowly building up to a coil spring action. You should pay closer attention if prices range start to be smaller. The USD has begun to flex some muscle in the previous week, if it can strengthen further, then we should take more caution on the equities markets. The "something big" assumption mentioned the last 2 weeks still stand relevant.