FKLI:- Stay Aside And Watch - 11/7/2011

I assumed too soon that the market's sideway mode was already over. It turned out that the ADX continues to descend and now it has reached 20's. This is confirming that the market is "dead". I am also getting another confirmation from the contradicting Stochastic and MACD. The Stochastic has already crossed down its 80's level while the MACD remains positive.

With this sideway setup, prices have been crossing up and down the upper Bollinger Band triggering buy and sell signal but the signals only lasted 1-2 days and then faded again into the opposite direction. The market is reflecting the risks on and off news from Greece. One day ECB says they have already resolved the problem, then next day some more bad news come out and neutralizes the earlier emotions.

 

The weekly chart continues to favor the bull as the MACD has finally crossed up. Though we are having a so called "golden cross", but please pay attention it is still below its zero signal line. This kind of crossover is usually less reliable.  The Stochastic continues to rise and is now approaching its 50's level. The DMI, though remains negative, has been improving as the D- is falling . The ADX has also turned flat. This is signalling that the bears are out of steam. I would like see price closing above the middle band which is effectively the 20 periods moving average. This would usually mean the bull is of a solid form.

The weekly chart seems to display more bullishness than the daily chart as the daily chart is now trapped in another sideway mode. But there is a bearish divergence formed at the Stochastic which is setting off my "spiderman sense". So I would suggest when you take up the buy side, you should be more cautious. This is especially so when the Stochastic is near its overbought zone. Fundamentally I expect more bad news coming from Italy in the coming  weeks. Italy is fast becoming the latest "target".  As far as the whole episode goes, I think everybody is just playing the wayang kulit show. Germany , China and some stronger EU members just are NOT willing to fork out their hard earned money. Everybody is just putting up a solidarity show in front of the media and say they will come to the rescue. Rest assure once they are back in their home country, they will lock up all their doors and windows try to prevent the Euroland Disease spreading to them. And as far as Greece is concerned, they have some really large loan installment due in late December, I doubt they can ever meet the payment.  Default is their only choice. Anyway, if you look back at history, Greece has been defaulting their obligations 50% of the time after their independence. Another word:- Greece has always been a BAD borrower, one that even our local loan sharks would avoid at all cost.