30/11/2007

Futures analysis

Two hammers have been posted by the futures, indicating a strong selling pressure, which holds the price below 3600. In fact, this double hammer pattern confirms, that current downtrend is not going to reverse yet, so another pullback ended up touching declining 20-day moving average - short term level of resistance. As long as this market stays in current area between 3600 and 3440, such situation prevents this potential double bottom pattern (marked on the chart) to actually form and reverse this downtrend. Now, the futures remain in a sidetrend, which signals waiting for Fed's decision, to solve this twofold situation. Breaking above 3600 will confirm a double bottom reversal, and breaking below 3440 will confirm a rectangle, which is continuation pattern. These are the key psychological short term levels for this market.

The last two-day action was a retest of key short term resistance level, that ended up being the upper band of a possible rectangle pattern in this market. The price has been consolidating in this previously developed range, and as I said earlier, so far there has not been any confirmation of going either way, so we have to wait until price breaks through 3600 or 3440 as shown on the 5-minute chart. The resistance area lays between 3605 and 3620 and today, the price touched its lower band, which established a lower high here, indicating selling aggressiveness. Preventing the price to retest 3440 again is the only level of support, that is plotted above the middle of rectangle - 3555. American indexes have erased their morning gains, so I do not expect any rapid or sharp price action on monday.