FKLI - It Is Merely A Technical Rebound- 12/29/2014

 

As I  commented in the previous  week that we may be getting a technical rebound and  the market staged a further strong rebound on last Monday gaining a further 36.5 points. It triggered a new buy signal as price is now above the bottom band with the Stochastic crossing above its 20's signal line. It passed the filter test on the next day when it went higher than the signal day high. Price has been going higher for the rest of the week. The Stochastic has now crossed above its 50's signal line which offers another new buy signal. The MACD has turned positive but it remains relatively "far" from below its zero signal line, so I would not talk about about that "golden cross" story. The DMI stays negative but the D- has been falling fast which mean the sellers have been rushing for the exit. The D+ is at a respectable 25's, but it has not been rising higher, so this is subtle sign that the buyers are NOT as strong as they look. The ADX has begun to fall, so this is telling us the prior trend has ended.

Immediate resistance should at the top band but it should be easily crashed through. If so, I would place my stop to below the top band as to protect my profit. 


 

In the previous week, I noted the long legged Doji Japanese Candlestick which is usually a potential reversal sign at the weekly chart . The reversal is now been confirmed because price was able to close above 1719 and 1765. This is from a different type of trading system called a 3 Candlesticks Reversal system which I apply in my own trading, but I would not want to add onto this column as it will get complicated. Though we have a nice reversal pattern, price is still below the bottom band with the Stochastic remains negative. So I would need another week of upward move in order to have a new buy signal.  The D- has begun to fall from its extremity and the D+ has risen above 20's. This  basically means  the sellers are relieving some of their shorts positions and buyers are rushing back in . The MACD stays negative and below its zero signal line and the DMI stays negative too. Both these are telling us that the bear is still in control.

This is strictly a technical rebound in an extreme oversold market. Nothing more. We are definitely NOT out of trouble as even if the government has finally decided to take the bitter pill and restructure the whole economy and administration, it would takes years if not decade. So I expect more pains to come. And if the government still decide NOT to do anything, the pains will be even more severe and last longer.