August futures closed lower by 34.5 point at 1190.0 on very high volume of 19,161 lots.

1. FKLI gapped down once more on a 167-point plunge by the Dow.

2. FKLI plunge in morning trade to a low of 1158 on panic selling, but a strong afternoon rebound pared losses to end the day off the lows, at 1190.

3. A black hammer is form and strongly suggests a bottom is near.

4. We expect FKLI to test 1111-1133 before rebounding. We hope it would test this level before rebound but it all depends on the Dow’s close. If the Dow closes in positive territory last night, then expect a gap up.

5. We are stopping out our shorts today at 1201.0 OH at close.

6. Turning long is optional. We would stay out until FKLI closes above 1250, the lower Bollinger band.

7. Note that based on the Ichimoku chart, FKLI is already a short since 1326. The new Ichimoku resistance is now 1326.

General commentary: FKLI may stage rebound but it should continue to stay weak to test 1111 – 1133. We would take profit around this area. This trend is likely to remain weak and we have not seen a selling climax as yet because yesterday’s volume was not huge enough.

Fibonacci target 1466(Revised on June 15)

Downside targets: 1212(hit yesterday!)/1133/1080

Ichimoku chart: (Based on Kumo (clouds) FKLI is now short. Kumo resistance is 1326. (Updated on Aug 6, 2007).

Average True Range for KLFE: A.T.R. is 42.14 points for FKLI futures. This implies you need to put a stop above/below this A.T.R. or you can get stopped out due to the volatility factor. We advocate a 1.5 x or 2 x the ATR. We are using a 5 days ATR.