Monday, October 22, 2007

22/10/2007

Futures analysis
As I expected on friday, today's session was crucial for determining short and mid term direction of this market. So far the moving averages have been proving their significance as support for the price. On a daily chart, we can also see, that the open interest has maintained its sidetrend, which does not imply any aggressive selling going on recently nor massive long exiting. On one hand this indicates, that major uptrend is not likely to reverse yet, but on the other hand, establishing new all-time highs will require significant flow of money in, to fuel the 'mark-up' stage of the next upward move. Basically, the last two candles have managed to stall the price between these two moving averages - 10- and 20-day. We have seen some volatility caused by macroeconomical news and earnings reports, which brought in more trading activity. Is the short term low being developed right now?
Now let's look on the intraday data, so we can have clearer picture of what is currently happening. The market confirmed exactly, what I was expecting - retest of significant support area indicated by 3780 ultimate short term support line and 50% Fibonacci retracement of prior extended rally. Now that my suggested support area has been tested twice, I can say, that the price has posted potential double bottom, which could mean the end of the short term pullback. Moreover, at the end of the day, price violated upper band of this declining channel, that I have been pointing out lately and closed just below another key resistance level that came from 21st of September. Breaking above 3850 will confirm a double bottom reversal and probably lead to another test of the all-time peak. As you can see, the latest price action is influenced by the earnings reports season, so the global markets have become more choppy than usual - forcing traders to take more risk.

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