FKLI:- The Bloodbath Plays 

Out - 8/8/2011

I was talking about "the next bear cycle would be an extremely explosive , nasty and a messy one" on 26/7 and "a possible bloodbath" the previous week and it finally happened last week. The whole world's market went slamming down and sucked FKLI into it.


Though my stop of 1558 was hit on last Monday, there was no reason to turn long when both indicators were still negative. I resumed selling on Tuesday when price went below the lower Bollinger Band again. With the ADX started to rise , I would watch the MACD indicator to manage the current trade.


Supports come with previous lows of 1497 and 1468.


I notice the fast expanding D- has gone to a bit extreme level of 43's, so there is a possibility that we may see the market take a breather around here or even stage a minor technical rebound before engaging in another round of selling.

 

The weekly chart continues to confirm the new bear. The Stochastic has crossed down the 80's level and the MACD continues to fall. The ADX has finally begun to rise indicating a new trend in formation. Last week price went below the lower Bollinger Band but managed to close back above it. I would watch the lower band again in this coming week as another signal to add on shorts positions.


The S&P downgrade of US credit over the weekend will logically bring on more fears into the market . But in my opinion, I think the market may has already factored this in long before it became a reality. The S&P Index 's bearish Head & Shoulder breakdown target should be  at 1115.90 which is about 80 points away.


I would NOT place too much importance on this S&P's downgrade, you should remember these are the same idiots who gave AAA to Lehman Brother's products that last brought down the global market in 2008. And these are the same people who slept on their job with the current PIIGs crisis prior to their breakouts . The most important question to ask here is:- why should Americans allow this private company dictates over the government they elected to manage their economy?


The following is written by a hedge fund manager that practically sum up the whole situation:-

"Who exactly are these ratings agencies? Oh, those corrupted, easily deluded companies who are to sane analysis what a croupier at a roulette table is to an insurance policy. They showed in the lead up to the GFC that they go to the highest bidder and that they have little or no credibility. Suddenly these private companies have authority over the US government? And then let’s look at what happens to demand for US dollars if there is a downgrading. Nothing. The $1-2 trillion that they are arguing about is about six hours trading in the greenback. The US dollar is the world’s reserve currency and will be for some time….

They are nevertheless a symptom of a much deeper, long term issue — the replacement of the nation state with the market state…"


On top of all those "experts" ultra-extreme bearish talks of America is about to implode and become another Zimbabwe, China jumps forth and lecture America how to run their finances. A Sin Hua News Agency's commentary demands the printing of US Dollars should be supervised by an international body. Wow ! That is a good one. If one take a look at China's recent years M-1 money supply statistics (grew 300% since 2004 & 54% over the past 2 years), we should know China is the one that really need international supervision on their printing of new money, Obviously China, like the rest of the world are not capable of understand US's QEs are not about 狂印鈔票 but but rather trading short-term for long-term U.S. government debt, thus reducing the average maturity of all U.S. government debt outstanding. That is why we did not see any sign of inflation in US but instead it is happening in China. And yes,  the USD seems to be building a base the past few days with a possible double bottoms formation. If it can hold around here for a while, I may return to my USD super bull status again.



You would have notice by now, our local "experts" have been trying to reassuring you that the KLSE and our nation's economic fundamentals are still "strong" and that you should buying in those "gravity defying" stocks. Just to refresh your memories, they did these exactly the same things during the 1998 Asian financial crisis too. As for us technical analysis (mumbo jumbo to them) practitioners as long as there is no new buy signal, we just keep out. We leave the emotion on the shelf.