10/10/2007

Futures analysis

It's a good time for a pullback. As I'm writing this post, the Dow has already declined 140 points, which could support a possible downside gap on tommorrow's open. So far, everything I've written lately is actually taking place. The market gapped up today, exceeded the previous high for a short period of time and eventually came back below the yesterday's close, because of a negative open in the United States. In a daily timeframe, there is definitely some room for the market to retrace a part of the previous extended rally. We have this rising trendline that could be tested yet again before breaking through the all-time highs, we also have the rising 10- and 20-day moving averages, that already have proved twice as strong support.

In the 5-minute timeframe we can see, that today's market action was range-bound for the most part of the trading session. One could even see this as a pattern of a bullish flag, suggesting a continuation. And of course this could be true, if today's decline in the Dow Jones does not have a big overnight influence on WIG20 (resulting in a downside gap). Anyway, as I pointed out yesterday, eventual correction will encounter significant support levels, that could prove to be potential market turning points. These levels remain the same: 3850 - 23,6% retracement and previous 'derivatives expiration day' resistance; 3800 - also a prior resistance level and a 38,2% Fibonacci retracement.