02/10/2007

Futures analysis

Today, the market gapped up 58 points, due to Dow Jones index hitting a record high again above 14000 yesterday. The gap exceeded the potential level of resistance, that I pointed out in my previous analysis, which was the 3690 area. That led to a test of the upper line of the declining channel and finally to a break above it. As it can be seen in the 15-minute timeframe, the market retraced the whole corrective move, which started from the 3785 area and then found support on the 23,6% fibonacci retracement of the previous major upward move.

So the market is definitelly showing some strength here indicating further movement upwards, but now in my opinion, we should wait for it to confirm, whether today's gap is going to become another support level or not. The second chart shows three potential levels of support for upcoming days. First, the 38,2% retracement (3590-3783 move), which is the gap's partial fill as well as intraday support. Second is naturally the 50% retracement level, which is also prior support that's previously been violated (3690). And thirdly, the 61,8% retracement, near the prior level of resistance (3660 area).

As I'm writing this, the Dow has already declined 60 points. That means pressure for tommorrow's correction. A decline and close below the record level of 14000 could also mean a downside gap on tommorrow's open.