02/01/2008

Futures analysis

Happy New Year everybody, we are back from the holidays and ready to hit the markets again. But the beginning of 2008 brings us some bad news, driving global stock markets lower and lower again. Crude oil hit 100$ a barrell today, gold hit 860$, soybeans and wheat climbed more than 3%, which indicates, that major players are hedging against inflationary pressures in America. Moreover, Fed is expected to lower rates again, which is to prevent recession, but as we know, increasing money supply will spur more inflationary concerns. As you can see on the daily chart, today's candle looks like some sort of a downside doji cross, which indicates much selling pressure in the futures (explained later, in intraday section of this post). After posting a shooting star near the declining 20-day moving average, the market continues to decline second day in a row and will probably retest 18/19th December lows.

Lot of volatility going on in the market today, which was the result of today's action in commodities. On the open, the futures reacted to a selloff, that took place on 28th of December. Price pulled back, reached 50% Fibonacci retracement of the recent downside move and eventually posted a bull trap barely touching previous support/resistance level of 3532 (marked on the chart). Then, the sellers came in and drove the price back to its open, posting a huge 40-point gap on the close. Tommorrow's action depends now on the close in the United States. Dow Jones futures are declining almost 2% now, two and a half hours before the close. Also, some news coming up late in the day - Initial Claims and Factory Orders, which are to determine condition of american economy.