30/11/2007

Futures analysis

Two hammers have been posted by the futures, indicating a strong selling pressure, which holds the price below 3600. In fact, this double hammer pattern confirms, that current downtrend is not going to reverse yet, so another pullback ended up touching declining 20-day moving average - short term level of resistance. As long as this market stays in current area between 3600 and 3440, such situation prevents this potential double bottom pattern (marked on the chart) to actually form and reverse this downtrend. Now, the futures remain in a sidetrend, which signals waiting for Fed's decision, to solve this twofold situation. Breaking above 3600 will confirm a double bottom reversal, and breaking below 3440 will confirm a rectangle, which is continuation pattern. These are the key psychological short term levels for this market.

The last two-day action was a retest of key short term resistance level, that ended up being the upper band of a possible rectangle pattern in this market. The price has been consolidating in this previously developed range, and as I said earlier, so far there has not been any confirmation of going either way, so we have to wait until price breaks through 3600 or 3440 as shown on the 5-minute chart. The resistance area lays between 3605 and 3620 and today, the price touched its lower band, which established a lower high here, indicating selling aggressiveness. Preventing the price to retest 3440 again is the only level of support, that is plotted above the middle of rectangle - 3555. American indexes have erased their morning gains, so I do not expect any rapid or sharp price action on monday.

28/11/2007

Futures analysis

As it turned out, euphoric buying took place late in today's trading session, which defended short term support area of 3430-50, but the futures closed just at declining 10-day moving average. The global markets totally ignore weak macroeconomical data, coming out from the United States and as a result, we have another rally in the Dow and S&P500, fueled by financial stocks. Now, we can see that what is currently going on is pure short term speculation based on emotional responses to just one or two daily facts. Moreover, there is still a possibility, that the crowd, which is shifting through its emotional states, could drive our WIG20 back to the uptrend. That may occur, because today's price action has established a double bottom pattern in the daily timeframe, which is confirmed if the bulls manage to push this market above 3610 level.

Today's session started with an upside gap, which I expected yesterday. The price retested 3440, which is the longer term level of support and a crucial market point, from where the initial rally had started (and led to establish new historical highs). So now, the whole movement has been retraced by the market. Trading activity emerged after retesting the support and the bulls regained strength, that drove the price back to another short term resistance level, that is 3555. Now, we are facing exactly the same situation as couple of days ago. This could evolve into a double bottom pattern, if the futures manage to get back above 3555 and then reject prior bull trap at 3600. Further from there, it will be safe to say, that trend reversal is coming.

27/11/2007

Futures analysis

As I was expecting yesterday, the price retested its nearest short term support, which is 3450 obviously and is now entering a key psychological support area in the daily timeframe. As recent pullback appeared to be very weak, the overall measured move got extended and shows a new longer term downside target for the futures. The previous measured move indicated a retest of the august lows (taken from 3960 to 3550 and subtracted from this 3-day mid November pullback, that had occurred before the latest correction). Now, if I take the whole move from 3960 to 3450 and subtract it from 3615, it will give us price target of 3105 (assuming, that this market will not form a double bottom right here at 3450 and reverse, which is still possible).

In the 5-minute timeframe, today's price action was just a continuation of previous movement, that took place on monday. The upper trendline, that I plotted on intraday chart will now act as a resistance, while the futures are declining in this pattern of lower highs. As for tommorrow's open, there could be some euphoric buying, caused by today's unexpected announcement of Abu Dhabi Investments 'injecting' money into Citigroup. This event was a catalyst for a rally in american stocks and may drive up the WIG20 futures also, as it usually happens after such increases. The investors did not even care about weak macroeconomical data about falling housing prices and - most importantly - consumer confidence. Tommorrow is the Beige Book report coming out, so definitely there is going to be a lot of volatility in the markets until the week ends.

26/11/2007

Futures analysis

The futures are still in bearish mode and have only managed to reach the declining 10-day moving average, which shows that the buying force is not going to regain strength at least for now. Today's candle in the daily timeframe in alignment with two previous days, has formed a huge bearish engulfing pattern, that drove the close even below thursday's open. This whole recent pullback developed on a declining volume, so in my opinion, the market is poised to decline further. Open interest bouced off just a little and if the price goes below 3450, it would mean that new money supports the short side rather.

Intraday data shows recent price action in more detail and it can be seen, that the futures market has retested some important geometrical levels. I thought, that getting above 3600 would bring more bulls and give reason to get long at least in the short term, but this whole movement appeared to be to weak and everything above 3600 has become a bull trap. Recent volatility caused the price action to be more choppy than usual, so if I was to pick a short term support level, I would still go for 3460-50 area, because of numerous short term lows of lower significance on the way down. Upcoming announcements in America will cover very important data on consumer factors and housing, along with the Beige Book report, so definitely volatility will hit the markets again. My expectations remain the same as before - recession in the U.S. and retest of the august lows.

22/11/2007

Futures analysis

The market finally pulled back to 10-day moving average in the daily timeframe, regardless of what I expected yesterday. Global stocks rebounded, which fueled today's reaction in WIG20 futures. Open interest is still rising and supports this recent pattern on higher lows, indicating more aggressive buying. The 20-day moving average has recently crossed below 50-day MA and is about to cross the 100-day average, confirming prior bearish price action. Still, price movement does not show any signs of reversal, except for the short term. The nearest news from America is coming on 27th of November, so until then the global markets will mostly depend on less significant data from other countries and technicals, which would make my forecasts more accurate.

The 3550-75 resistance zone, that I pointed out a couple of days ago has expanded to 3595. The futures stopped there and closed, extending 5-day rally, which confirmed short term bottom near 3450 area. Today, the stock exchange in America is closed, due to Thanksgiving, so tommorrow we are going to find out, if our futures are strong enough to get above 3600. Definitely, this 3550-3600 area has become a turning point in this market and any reaction either way will define future direction for the price, so it will determine whether this latest action is going to become a bottom, or continuation pattern. As for the global markets, the key is now level of consumption and housing market development in the U.S., because these are the only factors that will save this country from getting into recession and stock indices from the bears. As I said earlier - neither action from the Fed is going to turn up the stock markets.

21/11/2007

Futures analysis

After a wide-ranging-day the market posted an inside bar, which was a natural reaction to yesterday's positive close in America. But low volatility so far confirms, that what has been happening over the last four days is probably going to end up as just a flat correction in this downtrend. Today's announcement about initial claims in the U.S. met the expectations, so we did not witness any sharp moves as earlier. Open interest bounced up a bit, but new money has not managed to drive this market up even to declining 10-day moving average yet, implying more short term weakness. As for tommorrow, the odds are with sellers and I expect another decline, maybe to retest 3450 again. This would probably be driven by today's downside action of american indexes (S&P500 erasing year's gain).

Although intraday action looks rather good (price making higher lows up to retest the main resistance area) I do not think, that there will be any reason to get above 3575, unless something unexpected happens (i.e. overnight news). Basically, today's price movement was mostly sideways, finishing just a quick rally to at least partially fill morning gap. Now that the market has posted just a flat correction, it leaves definitely more room and pressure for the futures to decline and eventually reach august lows, which I expect. So far, I consider yesterday high as a bull trap, unless price stays above 3450 and forms at least a rectangle pattern, what would increase the odds for current downtrend to reverse. More and more expectations are for recession in America, so the global markets have discounted eventual rate cut already (i.e. american bond market).

20/11/2007

Futures analysis

In the daily timeframe today's action in the futures ended up as a hammer, which confirmed short term bottom, that I was expecting lately. The market has another chance to recover and will probably reach the nearest declining moving average (10-day in this case). Moreover, today's daily candle is so called wide-ranging-day, which is a common indicator of trend reversal. The price exceeded two previous highs, so there might be a chance to see this market at least staying in recently developed range between 3450 and 3570 for little longer than three days, before the week ends. Still there is a lot of volatility in the markets, caused by unexpected macroeconomical data (today's housing starts for example) and also by betting on upcoming December Fed decision.

In the 5-minute timeframe we can see, that the futures have entered a significant short term resistance zone, which in my opinion has become more of a turning point for this market now. That is because getting above 3576 (23,6% Fibonacci retracement) will indicate more strength of the buying side and probably drive the price back to reach the 38,2% retracement, corresponding with prior support/resistance areas. The close in the U.S. is positive, so the odds for tommorrow are rather against the bears. As for mid term action, I do not think that Fed decision to cut the rates would even be a catalyst for a global reversal. Inflationary pressures are high and will improve with eventual cut, because that will weaken the dollar even more and drive commodity prices higher, so we might only see a short term euphoric buying in stock markets and then returning to downtrends on inflation concerns. Leaving the rates unchanged will reduce concerns, but rise those about recession. Either way, my stance remains as before - retest of the august lows.

19/11/2007

Futures analysis

Two days of indecision in the futures imply exactly what I said previously: we have a short term bottom. At the time of writing, the Dow is declining more than 200 points on 'sell' recommendations for Citigroup, so if the situation remains this way, tommorow we can expect a retest of 3450. Also, there will be news on housing starts and building permits, which is to determine expectations for december Fed decision. Now, the futures are entering major support zone, that is supposed to slow this declining market, at least in the short term. Today we saw a higher low in the daily timeframe as little evidence of buying, which was fueled by rising open interest. All of the moving averages have downslope now, so current downtrend is unlikely to reverse.

Daily timeframe indicates indecision and short term slowdown, but intraday data shows practically opposite situation. As the latest decline finally ended and posted a single day correction, the market pulled back only to 38,2% Fibonacci retracement and started to make lower highs from there. Even downside spikes, that occurred late in the day (implying reversal) might be overlapped tommorow, if America continues to decline. Mid term picture remains the same - the market is still prone to retest august lows.

16/11/2007

Futures analysis

Today's session posted a doji bar in daily timeframe, suggesting short term bottom may be forming. The price reached 3453, which is actually prior support level from may and september, as you can see on the chart. We are currently entering another support zone that is theoretically supposed to slow this market. Though I expect a slowdown in the short term only, because of ultimate price target for the futures, that is - august lows (forecast from measured move, check out yesterday analysis). Unless something 'better-than-expected' happens, the global markets are rather meant to decline on weak macroeconomical data coming from the United States. Rising commodity prices spur inflation, which will cause consumers to reduce spending for consumption and eventually drive the economy into recession.

The bad thing about today's session is that selling occurred late in the day, not initially. That puts more pressure to the downside obviously, but nonetheless, increased volatility, causing fast and sharp moves may imply forming of a short term bottom. At least, in relation to previous two-day action, that took place on 9th and 12th of november, this is similar pattern. The open interest flattened for a short period, indicating indecision, which is also parallel to previous case. As for now, there is little evidence of actual buying and situation will remain this way, as long as the market stays below its nearest short term resistance - 3543, plotted on the 5-minute chart. Don't try to pick a bottom here. Wait for some confirmation, such as higher lows, or retests of 3543 level. That will indicate upside potential.

15/11/2007

Futures analysis

Another day of decline in the futures. This time, the price fell over 2% in relation to yesterday's close. Weak pullback suggested, that this market is not stopping yet and current sharp decline will extend probably to reach august lows, as plotted on the daily chart. Though, short term support levels, which I outlined yesterday, remain the same - mid-term price target changed. The global markets are declining, because of weak macroeconomical data coming from the United States indicating slowing economy and that is basically what are we going to see in the upcoming weeks. It is actually a delayed reaction of stock markets for rallying commodity prices, that create inflationary pressures.

5-minute timeframe tells, that previous important geometrical level was broken - 76,4% retracement. Now, that there is no significant support, the market is on the way down to reach the initial rally point of 3440. The only barrier to break is the intraday low of 3477. As Dow futures went -1% today, it is questionable whether the market is going to surpass 3440 tommorrow, because of large chunk of today's american decline has already been priced. Notice, that the open interest is still falling, which means money is coming out of the market, so we have not actually witnessed opening of new short positions yet. The declining prices are fueled by quitting of the long side.

14/11/2007

Futures analysis

Today we had another decline in the futures. The market gapped up in the morning as a result of yesterday action in the United States, but then it erased nearly all of yesterday's gains. Resistance, that I pointed out yesterday (3640) was actually violated from the upside today, but eventually remained as such, judging by the price action, late in the trading session. Moreover, intraday high of 3667 established at another resistance, creating an actual area, which the price will have difficulties to break (3640-3670). The nearest support level for the daily timeframe would probably be the 61,8% Fibonacci retracement of this August-October rally, which corresponds with some prior support from April. If that fails, then the emergency level, would definitely be the 76,4% retracement, which also corresponds with prior support, but from September. These are the potential levels, that might cause some people to stop selling. It does not mean, they will prove as support for sure. Look for evidence of buying in the lower timeframes.

In the 5-minute timeframe, today's price action posted a typical ABC correction of prior rally. Intraday high corresponds with prior support level near 23,6% Fibonacci retracement, which is plotted on the chart and became short term resistance. That rather favours further declines in this market, meaning that we are probably going to see another retest of 3554 support tommorrow. The more a particular support/resistance is tested, the more it is likely to fail, so expect another long squeeze below that level. The open interest still has not recovered, nor even flattened, so we still have massive long exiting, driving this market lower.

13/11/2007

Futures analysis

Finally we have reaction in this market. Today's session was definitely influenced by american indexes, which rallied on better-than-estimated earnings report of Wal-Mart. Yesterday's inverted hammer proved to be a reversal candle and the price retraced back even above friday's close, so after a sharp decline, we have got a sharp pullback, which will probably extend at least in tommorrow morning, because part of american rally has not been priced yet. The market retested from the downside the latest significant level of support in daily timeframe, which is 3645 obviously. This is definitely a turning point as for the short term and tommorrow's action will show, whether it is going to remain as resistance or not.

Intraday triple bottom was confirmed today, so 76,4% Fibonacci retracement remained as this significant level of short term support. The futures retraced back part of the last two-day 'exhaustion decline' as I call it, but found resistance at 61,8% retracement with flattened open interest (indicating rather indecision than actual return of the buying force). Now, the question remains: is this market strong enough to pull back to at least 3700, because such action could trigger mid term bottom to form itself and increase the odds for reversal. Remember, that the moving averages and Fibonacci levels are potential levels of support, which means that it is not yet safe to buy there. So do not try to pick a bottom in such sharp declining market, wait for the evidence of buying, by checking lower timeframes.

12/11/2007

Futures analysis

In the daily timeframe, the futures posted today an inverted hammer near yesterday selloff's low. The open interest is still declining with higher than average volume, so clearly this sharp decline continues with little chances of pulling back in the short term. Although an inverted hammer candle indicates a potential reversal in the market, today's action in the American indexes puts up rather contrary stance for tommorrow. On the daily chart I plotted some levels of support of similar significance. Two previous from early and mid october have already been broken by the price, which initially started this bear market. The nearest downside target will probably be the 3420 area, which is a support of even more significance.

5-minute timeframe shows a short term triple bottom, that formed in the past two days, but that does not indicate a reversal yet. Moreover, the price fell to 76,4% Fibonacci retracement and closed actually below it, showing even more weakness with potential to retest 3440, where the rally started. Open interest declines along with the price, beating the remaining bulls and posting still lower highs. The only reasons that support the buyside are following: The decline has already made three downside overnight gaps, indicating that the price is exhausted Market stopped at significant geometrical level, which in conjunction with above, might suggest at least that this sharp decline should slow down

UPDATE: The Dow futures closed as an inverted hammer also, with a 0.44 decline today, so it may indicate, that we are slowing down.

09/11/2007

Futures analysis

The futures sold off again today. Long shadow on the daily chart indicates a possible short term bottom forming, but monday action will strictly depend on the close in America, which is again highly negative (-200 points in Dow Jones). Also, have in mind, that the slowing american economy might finally cause crude oil price to decline, as lower consumer income will decrease overall demand for gas. Nearest downside target in weekly timeframe for crude oil is around 80$ a barrel, which might push the stock markets up. Now we have to wait and see whether WIG20 futures are yet strong enough to even pullback and reach this broken 100-day moving average, because then we will be able to determine the condition of this market (how bearish it actually may become).

Intraday data shows how hard is to pick a bottom in this market. Though late in the day, bulls came back for a while and drove the price above 3600 on the close. The futures bounced off of the 76,4% retracement of initial extended rally, which eventually drove them to reach new historical highs. Yesterday I thought, that the price was exhausted and that we already have a chance to see actual pullback or at least short term bottom, but nothing of that happened and in the wake of still growing credit concerns, the futures might find more room to decline further.

08/11/2007

Futures analysis

Expect the unexpected - this is probably the best way to describe latest market behavior, which posted another downside gap and ended up forming a hammer candle in the daily timeframe. I am starting to get more confident about what I wrote couple of days ago. What we see, is a delayed reaction on rallying commodity prices, mostly driven by crude oil, gold and silver - the best bets for inflationary times. The futures have formed a double top as historical peak and today's session apparently proved as its confirmation. I was worried about this market getting below the long term moving averages, but it seems that the selloff gained some strength, fueled by constantly rising volume and declining open interest (stop losses). Basically the daily timeframe now shows somewhat of a polarity in this market and that unfortunately fuels the whole concern about whether this situation will turn into bear market or not.

5-minute timeframe apparently shows opposite situation, at least for the short term. Today we had third in a row downside gap, which usually signals price exhaustion, meaning that the decline is over and about to reverse. The price ended up in much wider support zone, than I pointed out in my previous analysis. First of all, the 3700 level is broken, meaning more weakness in the market than I primarily expected. Of course, there was a retest of this level, but from the downside, because of the overnight gap. Considering another selloff, that is going on in America, it is too hard to judge really, where to pick a bottom in this market. Only reason supporting at least a stall (not yet a reversal) is that american index futures posted intraday double bottom patterns late in the trading session. That would be the setup for tommorrow and beyond probably, if nothing unexpected is about to happen overnight.

07/11/2007

Futures analysis

I have learned one really important thing - stick to your primary opinion, especially when you are forecasting the price action. Firstly, I was saying that the futures have yet little more room to retrace, because of the moving averages catching up close to the price. Yesterday I changed my mind and wrote, that this market has found its ultimate short term support and is about to hit the highs again. So now, we have exactly what I said in the first place - retracement towards 50- and 100-day moving averages. Volume was little higher than average in the past few days and open interest declined a little bit, so definitely today we had somewhat of a selloff, or stopping out of the weak holders. On the daily chart I plotted another support zone, which I think might be tested, considering high volatility in the global markets lately. So, if the main uptrend is ought to stay intact, then we would see some bear trap spikes or candle shadows, which would indicate accumulation phase. The whole situation, that took place today was caused by China officials saying that, in the wake of weakening USD, they are considering diversification of their currency reserves. That hit the USD/JPY mostly, which corrected after declining for almost twelve hours.

Today, the futures declined sharply without even looking back until very late in the day. The price did not reach former support and found resistance even lower, which is a sign of weakness in this market. That indicates possibility of further decline, to eventually reach 3700 area, thus the last major upside gap. The double bottom, that I pointed out on monday did not hold obviously, due to this unexpected announcement from China. As always, keep an eye to close in America, because it will determine, whether the correction is over (already priced) or not (which would mean retesting of 3700). We have entered a period of great uncertainty, because the stock markets have been rallying along with commodities basically since late august (Fed decision). The dollar is constantly declining, which drives the commodity prices north, causing great inflationary pressures and threatening, that american economy will develop at a very slow rate. Now that WIG20 futures posted a global double top and then fell back down, it could imply, that the stock markets have finally reacted to such big rallies in crude oil, gold and silver. My concern now is that, if price breaches through the long term moving averages, this could mean a trend reversal and, eventually lead this market to become bearish.

06/11/2007

Futures analysis

Low range trading occurred in the futures today - no significant news, no unexpected data. Basically we can judge this, as a correction of the short term decline, which begun in the end of october. Trading activity is low, but the open interest still rises, indicating new money coming into the market. Upcoming days will show, which side does this new money support - bulls or bears - depending on the situation in the global markets. Still, the daily timeframe shows that futures have made a higher low and that of course means bias on the long side in this market, so maybe the price has already confirmed bouncing off 3780 and indicated, that we are ready to retest all-time highs again. Surely this is hard to judge, if there is not any significant event, to drive the prices either way.

Judging by the intraday data, the futures made today somewhat of a flat correction of monday's rally. There was little more movement late in the day, due to american session open and price retraced 50% of the whole two-day move, but for the most of time, it was moving sideways with rising open interest. This more detailed view allows me to be more confident about this market's return to uptrend at least in the very short term. American indexes are in the positive territory so far, after volatile start of the trading day and as long as they remain in this position, it will be a good forecast for tommorrow. The nearest upside target is probably around 3860 - prior level of support and resistance - the middle of consolidation channel.

05/11/2007

Futures analysis

The futures have retested the lower band of the support zone, that I plotted in my previous analysis. Everything is going just as I have forecasted. We have a lot of volatility going on in the markets, which is caused by rising concerns on subprime mortgage crisis, affecting financial companies' earnings reports. Today we had another CEO stepdown, this time in Citigroup, which also posted huge writedowns. The technicals are still good for this market in the mid and long term. In the short term though we have these crossing 10- and 20-day moving averages, which are currently depicting ongoing decline in the daily timeframe. My only concern about this crossover is that, the last time we saw these averages crossing near the all-time high was when the global markets collapsed, because of subprime mortgage crisis in the United States and it may repeat. Longer term view favours of course rising 50- and 100-day moving averages and that also leaves little more room for the price to decline safely, which means that the overall trend may become neutral, but not bearish yet.

In the 5-minute timeframe the market retested yet again the most important short term support zone, which I pointed out earlier in october. And such retest confirms the significance of 3780 area, which is also a 50% Fibonacci retracement of the last rally, that led to the new peaks. Today, the futures opened again with a downside gap, which is third downside window in a row, suggesting supply force exhaustion. Moreover, the confirmation ended up as an intraday double bottom and may actually indicate reversal in the short term downtrend. Such reversal may occur, if we consider that today's decline in America has already been priced. If it has not, the futures could start tommorow session with a move to the downside again. As long as the price stays above the crucial 3780, there will be little danger of damaging the main uptrend.

04/11/2007

Stock candidates' performance

No winner this week. Especially when upcoming days are going to bring further pullback to the market.

	ATLANTIS deviated from its symmetrical triangle to finally form a descending version of this pattern. Recently there has been very low trading activity, which does not yet imply that heavy selling pressure is coming. Though I would suggest to be more defensive before getting involved, because the price still could violate the lower band of this triangle - 2,20. Then we would probably see a retest of the closest support level - 1,75.
	ENERGOPOL also remained in its pattern, which in this case is a classic rectangle. The last two candles in the daily timeframe are hammer and a doji, which puts this stock practically in the same situation as above - low volume pullback and reversal candles with long downside shadows. There is yet a chance to violate 18,90, which is the lower band of the rectangle.
	MOSTALPLC posted a hammer on friday, also indicating, that it will stay inside its all-time-high-rectangle. Same as before, no upside breakout, reversal candle near the short term support, low volume pullback. This week, we had no winner, but no loser either. Basically these candidates can go either way, but for now, they have remained in sidetrends.

04/11/2007

Futures analysis

Friday's session posted an inverted hammer candle in the daily timeframe, suggesting that current pullback is slowing down, but also that it has little more room to extend and retest previous significant support levels. Another concern is the rising volume, indicating more selling pressure going on recently in the futures. On the daily chart I plotted this support zone, where I think this short term pullback is going to end. Eventually, we could see a retest of rising 50- and 100-day moving average, which are quite close to this zone, if it fails to sustain. As I was warning in some of my previous posts, there is a lot of volatility in the markets right now, caused by ongoing earnings reports season. Recently the major investment banks have been announcing huge write downs, generated by summer subprime mortgage crisis. The american indexes have made lower highs after bouncing off their corrections and now a lot of people are concerned about whether the august lows are going to be retested or not. So we are now in quite difficult situation, because the futures have made new historical highs, but simultaneously formed a potential double top pattern, which could reverse the long term trend if price falls below these two moving averages.

The intraday data shows in detail the support zone in this market (which I plotted on daily chart). Now we can see clearly, that this zone consists of two separate areas. The futures have already pulled back to the first one between 3820 and 3830 and closed there, which does not indicate downside violation yet. The second zone is somewhat 'emergency support' (3770-3780), because it is the lower band of a rectangle pattern, that market has been recently consolidating in. Breaking below this, especially on rising volume could lead to a retest of 3700 and then even 3600, depending on condition of the global markets. So in the short and mid term this market can not only enter a sidetrend, but it might fall lower, suggesting a start of a new downtrend.