24/10/2007

Futures analysis

The market is nearing its all-time highs again and daily chart posts a hammer candle, which is also an 'inside day' - a typical stall/reversal pattern. Of course we are still above the rising moving averages, but recent weakness in the global markets caused mostly by poor macroeconomical data and earnings reports bring the supply side into business once more. Apparently, the price has to make another higher low, in order to finally get through the final resistance, which means at best we are going to see a flag/rectangle consolidation, but only if WIG20 stays under little less influence from declining foreign indexes. If the situation gets worse, I would bet on yet another retest of 20-day moving average.

Today the market gapped down a little on the open and did not even reach the all-time peak. Short term double bottom is confirmed as long as the price stays above 3860, thus keeping the gap unfilled. Otherwise the market could retest 3770. Considering today's decline in the U.S. (already -185 points on Dow) defending this gap will be really hard for the bulls tommorrow. Moreover, thursday will bring two important news: initial claims and new home sales, both expected to be worse than previously, due to concern about slowing american economy.