13/12/2007

Futures analysis

Returning back into the bear market. The futures did not manage to get above 50- and 100-day moving average, in spite of lower interest rates in America, which are supposed to save the global markets too. Double bottom pattern will be tested yet again. Firstly, getting below 3610-15 area, will put this market into alert mode, and then getting below 3440 will indicate definitive continuation of a downtrend. Now, it appears, that Fed's decision did not help at all, because interbank market has already discounted borrowing rates as higher than their nominal value, so the market cost of money is still rising. As for the daily timeframe, if the market stays above its nearest short term support (which is plotted on the chart) near 3610, then there would be a chance to defend the uptrend. Otherwise the bears will be back in control.

Intraday data puts on a very interesting short term picture of the futures market. The latest price action looks exactly as it comes from Elliott wave principles. The initial rally consisted of five waves, ended up on monday and today, we saw the final leg of three-wave correction, which found support at 38,2% retracement of the whole rally. This retracement happened to come along with 50% Fibonacci level of a move, that was taken after the first wave, as it can be seen on the 15-minute chart. Another thing worth noticing is a potential head and shoulders pattern, which has developed in the area between 3640 and 3760. The neckline was violated today and the futures pulled back to it, confirming, that it is a level of resistance now. If the market continues to decline, downside target appears to be near 3540 area.