12/11/2007

Futures analysis

In the daily timeframe, the futures posted today an inverted hammer near yesterday selloff's low. The open interest is still declining with higher than average volume, so clearly this sharp decline continues with little chances of pulling back in the short term. Although an inverted hammer candle indicates a potential reversal in the market, today's action in the American indexes puts up rather contrary stance for tommorrow. On the daily chart I plotted some levels of support of similar significance. Two previous from early and mid october have already been broken by the price, which initially started this bear market. The nearest downside target will probably be the 3420 area, which is a support of even more significance.

5-minute timeframe shows a short term triple bottom, that formed in the past two days, but that does not indicate a reversal yet. Moreover, the price fell to 76,4% Fibonacci retracement and closed actually below it, showing even more weakness with potential to retest 3440, where the rally started. Open interest declines along with the price, beating the remaining bulls and posting still lower highs. The only reasons that support the buyside are following: The decline has already made three downside overnight gaps, indicating that the price is exhausted Market stopped at significant geometrical level, which in conjunction with above, might suggest at least that this sharp decline should slow down

UPDATE: The Dow futures closed as an inverted hammer also, with a 0.44 decline today, so it may indicate, that we are slowing down.