18/10/2007

Futures analysis

Just as I wrote in my earlier analysis, the market pulled back deeper and tested the rising 20-day moving average. Today's data considering initial claims in America indicated a slowing economy. That caused treasuries to rise, because investors are betting on another Fed rate cut. This is the short and mid term catalyst for the global share markets to rise. On the other hand, we will also witness volatility pushing the markets either way, because of this earnings reports period going on right now. The current corrective wave is stopped at the moment, judging by the range of the first pullback after 'Fed move' bottom, seen in late august. These declines are indicated on the chart by rectangles to outline their similar size.

Today's session was a good proof for the 'first 30 minutes rule', that works well especially in the futures markets. The market opened with a little upside gap, then fell below this 23,6% retracement (plotted on the chart) and then found resistance exactly at this Fibonacci level. So the price did not even have a chance to return to its open, which eventually drove this market lower. Just as I expected in my yesterday analysis, the most important level of support appeared to be prior resistance, that is all-important 3780, near 50% retracement. Best bet for now is probably "stall", because of upcoming Sunday elections in Poland. Until now, the politics have not significantly influenced the market (not counting earlier incident in ministry of agriculture, which brought down main indexes slightly), but now everything can happen, considering very aggressive campaigns and overall tension going on. Holding an overnight position until monday will involve more risk than usual.