31/10/2007

Futures analysis

Today was probably the last day of decline in the futures market. Price retested the rising 10-day moving average and considering what happened today in America (Fed lowered the rates by 25 basis points) we are ready to hit new highs. Tommorrow the Warsaw Stock Exchange will be closed due to the All Saints Day, so the market will have a chance to react on this news on friday. Now that the Fed has cut rates, we have one indicator that is left, which will tell us more about future direction in the markets - treasuries. This market has already started to imply inflation concerns and will be discounting it probably until the next FOMC meeting. From now on I will try to post some more information about U.S. debt market, in order to make more accurate predictions.

Today's session posted a typical inverted hammer, which indicates reversal in the trend, so that means the short term pullback has ended. Last two days developed a 45 rectangle, which exactly defined the nearest levels of resistance and support. Above 3945 there is only this historical level of resistance along with recent double top - 3960, 3970 subsequently. That means, there is rather small space to make really rapid and quick moves, unless today positive close in the U.S. will cause an overnight gap in WIG20 futures. Such gap would be third unfilled in a row, which I would definitely consider as a price exhaustion and already start to get more defensive, expecting another short term decline (hopefully finding support at the all-time high).