28/11/2007

Futures analysis

As it turned out, euphoric buying took place late in today's trading session, which defended short term support area of 3430-50, but the futures closed just at declining 10-day moving average. The global markets totally ignore weak macroeconomical data, coming out from the United States and as a result, we have another rally in the Dow and S&P500, fueled by financial stocks. Now, we can see that what is currently going on is pure short term speculation based on emotional responses to just one or two daily facts. Moreover, there is still a possibility, that the crowd, which is shifting through its emotional states, could drive our WIG20 back to the uptrend. That may occur, because today's price action has established a double bottom pattern in the daily timeframe, which is confirmed if the bulls manage to push this market above 3610 level.

Today's session started with an upside gap, which I expected yesterday. The price retested 3440, which is the longer term level of support and a crucial market point, from where the initial rally had started (and led to establish new historical highs). So now, the whole movement has been retraced by the market. Trading activity emerged after retesting the support and the bulls regained strength, that drove the price back to another short term resistance level, that is 3555. Now, we are facing exactly the same situation as couple of days ago. This could evolve into a double bottom pattern, if the futures manage to get back above 3555 and then reject prior bull trap at 3600. Further from there, it will be safe to say, that trend reversal is coming.