A healthy pullback

The deadlock in raising the US debt ceiling raised concerns for a default in the US's credit rating and hurt the Asian market sentiment

Locally, the local bourse as indicated by FBMKLCI is still bullish with 50 MA above 200 MA and both are still slopping positively. Furthermore the ascending trendline is still intact.

Today the index fall but the volume traded is still less than the previous two days.

With 20 MA at neutral position, the index is being tested by the 10 MA.

The US debt problem has not affected the local bourse severely. Today fall in index is more of a breather from almost a 10% rise of the index last week.

US Debt Ceiling

The lack of progress on US debt ceiling give the European debt crisis a breather. The market believe that a small debt deal will be put on the table with no default but has a negative influence on debt rating with possibility of US debt losing it’s AAA rating (probably by one notch) and as result US will have trouble selling its debt and therefore driving US interest rates higher.

USDCHF (uc) fall below the 61.8% retracement and trade just below the 0.815 level. On the 60 MTF chart the MAs is stacked and negative slopping, a reflection of bearish undertone.

My entry on uc trading on 15 MTF in the face of bearish uc sentiment start at bar 1 with OB candle and the inability fro uc to cross over the MAs. Short at the low of OB bar 1 with my first TP for 1/3 of my position at 22 pips (0.81020). Take profit at that level-0.810.

Put my stop at BE.

At bar 1 close below 1.81, with next bar show a small bullish candle with the high is lower than previous high. Bar 2 an IB bar is formed and the subsequent bar is an IB bar. It was follow by a large bearish bar showing a continuation of bearish tone despite the indy’s are at bottom range.

Bar 3 is a doji with indy’s looking to move up. Exit the balance of my position and enter for long at next bar when it cross over the high of doji bar(bar 3). TP1 at 0.80979 was not reached with bar 4 is a possible evening star candle. Bar 5 creating a bearish bar that I took a stop and reversed action for short.

The TP1 was set at 0.8052 (0.805 level). The TP2 was given at bar 6 with a PB at extreme low for indy’s. SAR(stop and reverse) with a long entry at the high of 6 with TP1 at 0.80718.

The TP1 is not touched with bar 7 forming a bearish OB. SAR with entry for short below the low of bar 7.

Weekend Rest

The plan for Greece is sending markets higher across the board, with Nikkei up more than 1.2%, Hang Seng Index +1.7% and China 0.18%, following the pattern from Wall Street.

FBMKLCI close lower but managed to put out a higher high and higher low. Possibility market players taking profit as market take a break for a weekend. Traders attributed due to listing of Bumi Armada.

Technically, the market is recovering with 20 MA is flat while rate of fall of 10 MA slowing down. The index is testing the 61.8% fibo retracement at 1570.

Two strong days

Another bull candle albeit a small one almost a hanging man, but at a high volume..the highest volume for the last two week. The immediate picture is the test of the 10d MA. It is slopping downward to act as the immediate resistance. Judging from the strength of the market the last two days with both candles closing at the top half of the candle, FBMKLCI has got the juice to get through to test the 20d MA and the 50% retracement.

A reversal from current correction.

FBMKLCI managed to register a bullish candle with a close at previous day open. The low of yesterday was at 50% of Fibonacci retracement from a low in 6^th May to a high of 11^th July.

Today reversal is expected to continue to meet the downward slopping 10 MA before testing the flat 20 MA. The reversal upward of the index should be accompanied by high volume to pierce through the 20 MA and touched the upper BB and moved pass the previous high of July 11 to confirm that the bull that started 28^th October 2008 is still intact.

I am looking for initial resistance at 1575.

The gang of six less one

Obama give support for a USD3.7 trillion deficit-reduction plan by the five remaining members of the Gang of Six to solve the on-going US debt ceiling talks. The announcement give some strength for USD during the New York session.

As a consequence the uptrend of GBPUSD (gu) was halted at 1.615. Tthe gu or cable was unable to penetrate cleanly the 10 MA on the 60 MTF and trading below the uptrend line. Early Asian session today saw gu moving between the downward sloping 10 MA and flat 20 MA. With 50 MA also moving horizontally, the direction of ug need urging of fundamental news.

For today, UK economic consist of MPC policy decision and data of retail spending.

My first entry for a cable on 15 MTF start at bar 1 with IB bar on inability of prices to pushthrough decisively over the MAs and RSI fell below 50.

Second entry for buy at bar 2 with price action(pa) of IB and Stoc and RSI recovery from the lower extreme. As the 20 MA is below 50 MA the buy position is a bit risky. Exit at break even as gu showed almost a hanging man candle at Bar 3 and followed by a large bear candle with its tail spike below 1.61 level.

Looking at the price action and the MAs starting slopping downward I employed the strategy of breakout of Asian session (24:00 GMT to 5:00 GMT-the shaded rectangle). The breakout target is at 0.618 of the Asian session high and low range as first target and 2nd target at 1.618 of Asian range. My short entry will be just below 1.61 level with first target at 1.6073 and stop loss at 1.6130.

The third entry is at bar 4 with a signal bar of morning star candle and the indy’s reversing from the extreme low.

EURUSD sea-saw

During the European session, EURUSD(eu) is affected by the Greek distress and on US session Obama tango with the House of Representatives.

During the early session today, there was a golden cross between the 10 MA and 20 MA, and then price cross over the 50 MA from below on 60 MTF chart but unfortunately price than went flat.

THE eu also managed to penetrate the downward sloping channel.

However, eu has managed to cross the 1.41 and expecting to challenge the 1.415 level.

My first entry is at Bar 1- a PB after eu has failed to return above the 20 MA. Taking a sell position with target at 5 GMT (8:00 Broker).

A morning star doji and almost a PB, stop and reverse by short position for a buy. Position taken on indicators reversing from the extreme. About 1 ½ hour later , a golden cross with both MA sloping upward. A very bullish sign.

Gold is UP.

Gold posted new record highs yesterday and close above $1600/oz, as debt worries in US and Europe. Investors are concerned that Greece may default on its debt, and countries such as Italy and Spain, who are also struggling with high debt levels, will get pulled into the crisis.

Meanwhile in the US politicians are struggling to reach an agreement on a deficit reduction plan in time to avoid a debt default before the deadline of 2 August.

Those are the issues that trouble the fx market and stock market.

THE STOCK MARKET:

FBMKLCI fell in 4 straight days to pierce through the 50d MA. It also penetrated the lower Bollinger Band (BB) on high volume.

The fall from early July is reflection of market correction in early January when the index plunge for 6 straight days. It then drifted further for more than two months. The sharp early January fall was more on profit taking after end of the year window dressing.

Thus, does the early July correction due to mid-year window dressing?

Technically, the market is still bullish with 200d MA underneath it and 50d is upward sloping.

The January correction pushed the index downward to cross the 200d MA from above and then mid March.

With the local market affected by US and Europe debt problem, it is pointing southward. I am expecting the downward move to take a breather in the next coming days. If the index keep tagging the lower BB than the correction will be quite sometimes.

Next: The Forex Market

Due to my location, I will be trading between 4:00 GMT to 12 GMT on 15 min time frame (15 MTF).

Trade will be based on price action i.e. Inside Bar (IB), Outside Bar (OB) and Pin Bar (PB) with RSI (6 period) and Stochastic (Stoch 5,3,3).

Today we look at USDCHF or uc.

On the 60 MTF, uc is on the downtrend (below 50d MS). Price correction on Thursday/Friday carried it to the 50d MA and 0.82 level.

Today in early Asian session, uc gap down to Thursday low at around 0.8080 before moving passed 0.81 level easily and the uptrend during Tokyo morning session. The rebound should be moving toward 0.815 level and then to 0.82 level.

On the 15 MTF, uc 20 MA is approaching from below the downsloping 50 MA i.e. uc is the process of reversal from downtrending to uptrending. (Note: my broker time is equal to +3 GMT)

Signal bar 2, an IB with range 0.8122/0.81149. Entry at next bar at 0.8123 (breakout of IB high). Signal bar 1 is not taken as the next bar broke IB bar 1 at low. Price is on the upward since the RSI and Stoch are at low extreme.

TP1 is at 20 pips=0.8142. TP2 is at 61.8% of the Asian range (the colour rectangle)=0.8166.

Bar 3 is an IB at the top i.e. breakout of IB low is for short entry. Avoid it since uc is at early stage of uptrend. 50 MA upsloping on top of flat 50 MA.

Next entry is with signal bar at 3, an IB with range 0.81463/0.8139. Entry buy at 0.81563 on the next bar. TP on 10 GMT.

Hello

After six months hiatus, here I am again here I am again. My analysis will be as simplify as possible and avoiding all those weird mathematical led indicators. It will be more on price action and the unsophisticated moving average. Maybe I will throw in the standard RSI and Stochastic indicators.

Let start with Bursa Malaysia FBM KLCI index:

The current downturn or market correction, since the index is still above the 50 and 200 moving averages started on July 8^th with a hanging man candle. A engulfing candle tag along that also imprinted a conventional Outside Bar (OB). A break to the low of OB suggested a time to short the market. The breakaway carried the index passed the 10 day (10d) moving average (MA) and found support at 20d MA. A small bullish candle follow but the 10d MA act as resistance. A small bear candle was formed and the candle is a NR 7 bar (i.e the high and low price range is narrower than any prior 7 days. There was a break of the low of NR 7 candle and price is expected to fall further.

As expected, the index drifted lower looking at support at 1562 and the 50d MA. For the coming days I am looking whether the support will hold.