08/04/2008

Futures analysis

The market is still under the main long term resistance zone, which lies between 3125 and 3260. Today's session was another decline, which retested 3000 - lower band of resistance area, that I pointed out on 30th of March (shown on daily nearest futures chart). So the price action is developing sideways here and as long as it stays this way, it will indicate, that the current rally is getting weaker and possibly incapable of reaching the declining 100-day moving average. Speaking only in short perspective terms, this recent distribution process in the futures (just above 3000) is a prelude to upcoming major catalysts - trade balance and treasury budget data (10th of April). You can also see, that the volume has significantly diminished, as traders usually reduce their bets and overall activity before such announcements, to avoid getting caught in volatility.

Intraday Monday action went as I expected in my previous analysis. The market did retest the triple top pattern (established on 2nd of April), formed a rounded top and posted a downside leg, which continued overnight, as there was a 15-point window on the open today. Moday's session was confirmed today actually as a bull trap top in relation to resistance zone, that I outlined in my previous analysis (3020-45). Now, if we are to witness further downtrend here, this area has to be confirmed as resistance yet, in case of any rallies. As for potential downside targets, the next area has already been tested and it lies between 2970 and 2990 acting as wider support. If you combine two reversal patterns, that I was writing about - triple top and rounded top - you can see, that their alignment forms a double top in a single week perspective. This indicates how significant the 2970-90 support area appears to be now, as it has become a critical level for the double top confirmation.