FKLI - Trouble Looming Over The Horizon -12/16/2013

 

 
The market popped up on last Monday but failed to follow up. Instead it has been range bounding and has begun to fall. I would advocate profit taking or use the top band as your final stop level. The Stochastic is clearly in the overbought zone and has begun to drop its head. The MACD remains positive and stays above the zero line. The DMI is also staying positive with the ADX rising to 27's. With the MACD, DMI and rising ADX, I cannot say the bear is in the show yet. But I would start selling when if price goes below the top band with a complimentary confirmation from the Stochastic.


 

The weekly chart still has all the indicators in agreement as all of them are positive. The Stochastic is in the over bought zone and with a flat ADX, I would pay much attention to it. Price has broken solidly above its recent fractal high of 1828 which is a good sign for the bulls. But the flat ADX is still telling us that there is not yet a new trend in the market. But the bearish divergence has just got uglier with current week's high gone higher than the last high of
1834.50 (first week of May this year) Of course it does not necessarily mean the market will "die" tomorrow, but with its appearance, it is always  prudent to trade with the market with more cautions from now onward with the buy side.

If I need to look at the fundamental side of the market , then I cannot really say I find anything particularly bullish about our market. With the government's new found haste to avoid another downgrade from the rating agencies, they are pulling out all the subsidies and increasing tax revenues from every possible sources, the latest been the assessments. The coming year should be a painful year for the citizens, I think most governments are not too worried about an inflation, but a deflation is always dreaded which I think we may be heading for one. Our government is famous for refusing to take medication to correct the economy's many excesses (like the crazed property market, pork barrel infrastructure projects - precious capital tied down to unproductive items; insane expansion of the civil services - cash bleedings etc). The longer they are in the self denial mode, the more painful the correction will be when they finally come. Maybe is it what the bearish divergences in the chart are trying to tell us?