26/11/2007

Futures analysis

The futures are still in bearish mode and have only managed to reach the declining 10-day moving average, which shows that the buying force is not going to regain strength at least for now. Today's candle in the daily timeframe in alignment with two previous days, has formed a huge bearish engulfing pattern, that drove the close even below thursday's open. This whole recent pullback developed on a declining volume, so in my opinion, the market is poised to decline further. Open interest bouced off just a little and if the price goes below 3450, it would mean that new money supports the short side rather.

Intraday data shows recent price action in more detail and it can be seen, that the futures market has retested some important geometrical levels. I thought, that getting above 3600 would bring more bulls and give reason to get long at least in the short term, but this whole movement appeared to be to weak and everything above 3600 has become a bull trap. Recent volatility caused the price action to be more choppy than usual, so if I was to pick a short term support level, I would still go for 3460-50 area, because of numerous short term lows of lower significance on the way down. Upcoming announcements in America will cover very important data on consumer factors and housing, along with the Beige Book report, so definitely volatility will hit the markets again. My expectations remain the same as before - recession in the U.S. and retest of the august lows.