21/11/2007

Futures analysis

After a wide-ranging-day the market posted an inside bar, which was a natural reaction to yesterday's positive close in America. But low volatility so far confirms, that what has been happening over the last four days is probably going to end up as just a flat correction in this downtrend. Today's announcement about initial claims in the U.S. met the expectations, so we did not witness any sharp moves as earlier. Open interest bounced up a bit, but new money has not managed to drive this market up even to declining 10-day moving average yet, implying more short term weakness. As for tommorrow, the odds are with sellers and I expect another decline, maybe to retest 3450 again. This would probably be driven by today's downside action of american indexes (S&P500 erasing year's gain).

Although intraday action looks rather good (price making higher lows up to retest the main resistance area) I do not think, that there will be any reason to get above 3575, unless something unexpected happens (i.e. overnight news). Basically, today's price movement was mostly sideways, finishing just a quick rally to at least partially fill morning gap. Now that the market has posted just a flat correction, it leaves definitely more room and pressure for the futures to decline and eventually reach august lows, which I expect. So far, I consider yesterday high as a bull trap, unless price stays above 3450 and forms at least a rectangle pattern, what would increase the odds for current downtrend to reverse. More and more expectations are for recession in America, so the global markets have discounted eventual rate cut already (i.e. american bond market).