FKLI - Maybe, Just Maybe We Have Reached A Temporary Bottom ? -9/26/2011

 

The dim possibility of a double bottoms formation got trashed last week when the support failed to hold. The market crashed down another 58 points. The shorts stay intact as stop was not challenged. I would suggest placing stop at 2 days prior high plus 2 points as the bottom Bollinger Band is now too far away. If Stochastic is able to turn up above its 20's signal line, then you should tighten the stop further.

The MACD continues to dive and DMI remains negative which mean the bears are in firm control.   I cannot call Stochastic  as oversold purely because it is under 20's. It was already in its below 20's zone last week but it does not stop the market from losing another 50+ points. In a strong trending market situation, the Stochastic may remain "oversold" and yet keep falling to one new low from another.  But at the moment the Stochastic is displaying some interesting muted divergence and the ADX has been above the DMI, these are tell tale signs that the market may be oversold. Last Friday's candlestick was a long bodied with close higher than open. All these 3 items are pointing at a possible rebound. But these are merely hints and they are NOT telling you to "buy low".I would still need confirmations before engaging new long trades. (like Stochastic crossing up the 20's line or price close above the lower band etc)

I do not think we are at the end of the dark tunnel yet as the rising ADX is confirming this observation but I think the coming week if we do see a up move, we should treat it as  a temporary technical rebound  .

 

There is nothing remotely bullish at the weekly chart. The Stochastic, MACD and DMI are negative and the ADX continues to rise while prices stay below the bottom Bollinger Band. All these are confirming the bears remain solidly in control. As the DJIA has just broken one of its strong support, their down moves may continue to "inspire" our bears to act further.

The latest piece of XXX bad news coming from the Euroland is that cash rich corporations and high net worth clients have started to move their cash out from some French banks. I take this as a sign of "smart money" starting a run on the weaker banks. (try think our own local versions back in 1998/1984 when depositors lining up in front of their banks to withdraw all ) How soon would the smaller clients start to move out theirs ? Talking about smart money, one of my friends think Malaysian money are smarter as many have been moving out from KL property bubble and starting to buy Australian and London properties. By the way, have you notice their developers have been putting up marketing show every week in KL ? To me, I think by using fast deteriorating AUD or GBP buying into a property market that is about to collapse big time is hardly a "smart" move. The buyer would suffer losses both in the currencies and depressing property prices. Yes, I do not think Australia is "safe" and if Euroland continues to fall apart, I think we may hear bad news from the Aussies soon, especially their property sector.