FKLI - The QE Tapering Illusions Dissipated - 9/30/2013

 Market hit my stop on last Monday when price went below the prior day low.  Price has broken below the top band on last Wednesday with the Stochastic gone negative. Since the Stochastic remains above the 80's level, it may not be a very good sell signal for the more prudent traders, but for the more adventurous traders, that should be good enough to enter some sell positions. If you are one of the latter group, place stop at the top band plus 1 point.
The Stochastic may be crossing down below the 80's signal line by the coming week. If so, that would offer a more comfortable sell signal. The MACD remains positive but seems to be turning its direction. The DMI is also remaining positive but the the D+ is falling which is telling us the bulls are pulling back their forces. The ADX has begun to fall again and it has reached the 20's level, this may hinting that the market is going into another listless mode again.


 
The weekly chart's Stochastic has turned positive but the MACD remains negative. The DMI stays positive but the ADX continues to fall. The contradicting indicators and falling ADX are signs that the market is lacking direction. Price was not able to close above the top band is also confirm this. For the short term, I would watch both the top and middle band breakup or breakdown as the next possible direction that this market is going to take.


 
The monthly chart does not look too pretty too. The Stochastic has already crossed down its 80's signal line while the MACD seems to be turning downward. Both the MACD and DMI remain positive, so I would still call the market in a bull cycle. But with the Stochastic turning down, I would think we could be near or already at the end of the bull cycle. I would also like to draw your attention to the bearish divergences formed at the Stochastic and MACD. I always take their appearance as the ultimate warning that the market may be at the end of its road. As I am writing this, we still have one more trading day to complete the monthly Candlestick. If the Monday's closing is below the top band, then there is a good chance we may be witnessing the end of the current cycle.
As I mentioned last week, the market reacted as if  the American QE tapering was going to bring us all those beloved/cursed hot money immediately. And we have a lot of strange talks among the fundamental analysts as if we are still the darling of the foreign funds. The Japanese Candlestick Shooting Star/Spinning Top was a dead giveaway that the bulls lacked balls to push up the market. So it was prudent that we kept our stop tight. As far as the nation's big picture is concerned, I think the government is now been pushed to a corner by IMF, World Bank, rating agencies etc. to seriously cut subsidies and stop distorting the real economy. It is because of the removal of the subsidies, the long suppressed inflation forces will come out soon. For the short and intermediate term, the nation's economy is going to suffer "the sins of our fathers". But in my opinion, it is better that we take the punishment now before the whole subsidies thing gets out of control. We just have to look at what is happening in Sudan now as subsidies has to be removed drastically.