14/11/2007

Futures analysis

Today we had another decline in the futures. The market gapped up in the morning as a result of yesterday action in the United States, but then it erased nearly all of yesterday's gains. Resistance, that I pointed out yesterday (3640) was actually violated from the upside today, but eventually remained as such, judging by the price action, late in the trading session. Moreover, intraday high of 3667 established at another resistance, creating an actual area, which the price will have difficulties to break (3640-3670). The nearest support level for the daily timeframe would probably be the 61,8% Fibonacci retracement of this August-October rally, which corresponds with some prior support from April. If that fails, then the emergency level, would definitely be the 76,4% retracement, which also corresponds with prior support, but from September. These are the potential levels, that might cause some people to stop selling. It does not mean, they will prove as support for sure. Look for evidence of buying in the lower timeframes.

In the 5-minute timeframe, today's price action posted a typical ABC correction of prior rally. Intraday high corresponds with prior support level near 23,6% Fibonacci retracement, which is plotted on the chart and became short term resistance. That rather favours further declines in this market, meaning that we are probably going to see another retest of 3554 support tommorrow. The more a particular support/resistance is tested, the more it is likely to fail, so expect another long squeeze below that level. The open interest still has not recovered, nor even flattened, so we still have massive long exiting, driving this market lower.