05/12/2007

Futures analysis

A huge rally occurred today, driving the futures back up to the declining 100-day moving average. The double bottom pattern, that I was writing about couple of days ago has been confirmed by today's price action, so we have a short term trend reversal here in WIG20. Futures retraced practically the whole move from 3700, thus the last uncleared gap in this current decline. And if the bulls manage to drive the price above this level, there might be chances, that we will not end up in a bear market here. That would be forecast for the mid and longer terms, but in the short term I think we should focus on particular levels of support, which are plotted on the daily chart (3670 and 3610). These are the key levels, which I expect to be defended, if we are ought to return into uptrend again. Otherwise, this double bottom pattern will be for nothing.

The first support near 3670 is probably more likely to be breached, just when any profit taking occurs, so it will probably be tested intraday, but also could prove to be less significant in higher timeframes. That is because its position next to today's close, which is not far from there. As it can be seen on the intraday chart, the last three-day action was basically a rally, 50% retracement (described yesterday) and another upward leg, that ended up finishing a measured move in scale of 1:1 (lines plotted on the chart). It is a typical ABC correction, but the thing is, it should not remain as such, if we are to witness a reversal in this market. Important news coming up also and these are the most volatility-causing: Initial claims (tommorrow), nonfarm payrolls, unemployment, sentiment and consumer credit (all on friday), so the last-minute indicators, to judge Fed's move in advance.