Week 21 (24th May-30th May): FTSE100--Weekly Moo River Watch

FTSE 100

(based on 30-year advanced data charts)

Yearly

Price chart: We seem to struggle to reach the bollinger midline, now a key resistance at 4569 while Wilder's smooth MA20 near 3963 might provide key support. You may notice the bull run in 2003 was supported by that particulary MA line.

RSI: this one puzzles me a lot. We are stuck in a downstream moo river and we are in the process of crossing from the upperbank to the lowerbank, but we seem to be hanging in the midstream with almost a level shape, which provides scope for both possibilities, either going up to challenge the upperbank again or dive down to complete the journey.

Stoch: it is bearishly crossed and pointing downwards, though it has almost reached a level where it could potentially shape up a W there;

Momentum: it has been extremely bearish, so bearish that one can almost see that it has overdone its bearishness by falling out of the downstream moo river there.

Elder Ray: it has completed its crossing from the upperbank to the lowerbank and now it seems to be lying upon the lowerbank to have a think whether to go up or go down further.

Overall, it simply says that we are still deeply in the bear market.

Quarterly

Price Chart: it is pleasing to the bulls that we have finally bounced off the lower bollinger band as support (if you use close/line chart). The only concern there is last time when the bear market ended in 2003, it started with a well-formed W. If we are going to have another W here, then a dive towards 4000 is not to be ruled out. The difference is that the bear market in 2002/2003 actually went into an overdrive deeply penetrating the lowerbollinger band, so it has to shape up W to conduct a three-pointer turning round for the market. This time, as the lowerbollinger band provided the key support, a V shaped rally is also a possibility. It all depends on how high the rally can go, a bit further, we can almost certainly rule out the W scenario, i.e., another dive down.

Wilder's smooth MA20 at 5092 might be an attractive target to end Wave 1 for the new bull market rally, if this is indeed the case.

Rsi: if you draw a downstream moo river there with four banks, two upperbanks and two lowerbanks, you can see that we have managed to get through the lowerbank 1 and are now on the way to upperbank 1. It looks to me more like that we will get there before a severe pullback to test out the resolve of the bulls. This seems to suggest that this rally will continue onto a significant price level, like 5092 perhaps, as the upperbank 1 is near 47.

MACD: this is a tricky customer, throwing up various scenarios.
1. it has completed Wave 1 and 2 or AB and is in the process of Wave 3 or C, both of which suggest a more bear market to continue for many a quarter;
2. it is in the process of shaping up a giant W, but there is still further weakness to come yet, before a final turn around to shape up the right arm of the W.
Overall, it seems to indicate further weakness ahead at least in momentum.

Momentum: If you like to study failed W's for kicking off bear runs, there is no better evidence elsewhere than on this indicator if you look at the peaks of both bull markets in 2007 and 1999. This one seems to be bouncing off a key lifeline and is now possibly stuck in a giant triangle, with various possibilities, though the lifeline itself suggests that momentum has hit the bear market bottom for now.

Elder Ray: the story from this momentum indicator seems to suggest that this is one final bear market rally, before a final plunge and then the next rally will be the real deal. And it also seems to be suggesting that we are 2/3 way through this final bear market rally, so still some more upside for the bulls yet. And it says that once we have done with this rally, the bottom of the bear market will be a new low, but not much more, but a lower low against the March low.

Repulse: the lesson here is the failed W in 1999 is such a lethal one, how did all the fund managers and every other bull then ignored that with such a fatal consequence. Technical analysis is really far superior than any other way of analysing the markets, as it is void of all human emotions and all newsflows. The story here seems to say that we are almost ready to shape up a giant W, whenever every other indicator and price is ready to go.

Monthly

Price chart: 4680 winks at the bulls and says 'come and overcome this and then you can go where you want!', as that would help to shape up a giant W. But we are hesitating and we are finding it harder not to cash in investments at a decend profit, having had a good run. This is the third green monthly candle in a row, and we have got another week to deal the bears a severe blow, as three green monthly candles in a row is what I said a minimum requirement to end the bear market.

Rsi: that W off the lowerbank has given this ride plenty of bouncibility and we are trying to get to the upperbank near 45, but we seem to be waning in determination and weighing down by gravity a bit.

Other indicators are still supportive.

Weekly

Price chart: we are still inside that final square of the diamond and there is no visible M there yet. We seem to be struggling against Wilder's MA20 near 4420. If you put your imagination to work here. You can try to work out the various scenarios as this diamond is going to be broken one way or another:

1. a rise towards 4650 for a fake bullish break out of the diamond and then cave back down big time;

2. a rise towards 4820 and continue to rally towards 5150 or 5430 (I see a million bears shake their big heads in disbelief!);

3. a drop towards 4170 to find the final support of the diamond wall and a rise towards 4820 to finish the whole bear market rally and then come back down big, on breach of 4400, quickly dives down towards 4000, thus to shape up another diamond in the process.

While imagination outside or inside the diamond does resemble a flight of fantasy, but as long as you work out the parameters of confirmation or falsification and make out your trading plans based on different scenarios, it will actually help you to plan trading better for the weeks ahead.

This final square has a maximum of three week's shelf life before the diamond is broken either up or down, so be warned, flooding in the moo rivers is to come within the coming three weeks, be ready for some fast and furious actions. We might need a candle specialist to read these three candles for the past three weeks for us.

All momentum indicators are in correlated upstream moo rivers as price, but some are showing signs of waning, mainly rsi, stoch and Elder ray.

Good luck to all bears and bulls.