FKLI:- Will We Able To See A Little Rebound ?- 9/19/2011

Though most of the indicators were pointing at a listless market last week, I was warning that we should not let our guard down of another possible bear's attack . Indeed the bear launched another attack on last Monday by crashing through below the lower Bollinger Band with the Stochastic turning negative again. And despite overnight Dow Jones gains was not able to reverse the local market though they almost opened gap up daily but eventually unable to hold on to the gains. But neither did it go far down except on Monday. Place stop at 1447 to protect the shorts trade.

Both the MACD, DMI and Stochastic have turned negative, prices stay below the lower band. All these are confirming the re-emergence of the bear power. What is important is that the ADX has started to rise again, which may be pointing at a possible new trend for the bears.

Though  the Stochastic has gone into the much wrongly interpreted "oversold" area, but since the current "ruler of the day" is a strong ADX (43's) that has the lordship over the market situation, so I would pay more attention to the MACD rather than the Stochastic. But at this moment, there could be an interesting item developing, I think we may be having a possible double bottoms formation in this market. But of course we need to watch it to see whether this can hold in the coming week. If it can hold, then we may see a short term technical rebound. I arrive to this reading as there is some minor subtle divergence at the MACD and DMI.

 

The weekly chart remains firmly bearish as the MACD, Stochastic and DMI remain negative and prices stay below the lower Bollinger Band. The ADX continues to rise and now is healthily above its 20's signal line which is confirming a strong trend. With the presence of a bearish divergence, I expect a minimum retracement of 50% of its last bull rally and see FKLI goes back to 1,200's. So the big picture remains bearish though we may see some short term rebounds in the daily chart in between.

Meanwhile the crisis at the Euroland continues to play out and last week another so called "solution" was happily received by the stock markets. You should NOT be conned by all these make believe fantasy, their crisis is definitely not over yet. The next bomb may be coming from Italy and Spain and Portugal making another comeback to the front stage, and that one could just be the one bringing down the EU financial alliance - the question you should ask now is how long will Germany and other stronger members continue to pay their saviour role ?

As I have been advocated here:- forget all those so called blue chips, anti-gravity , GLCs stocks now and hold cash. There will be plenty of great investment opportunities down the road.