19/12/2007

Futures analysis

Another hammer was developed today in the daily timeframe, which indicates a potential short term reversal in the futures market. Two long downside shadows, combined with sharply declining open interest are a sign, that the remaining buyside traders have been stopped out and the supply is getting exhausted after four straight days of decline. 3440-50 still remains as major resistance zone for the short term price action. 10- and 20-day moving averages crossed over again, but considering how far are they from the price, it is quite fair to anticipate a greater pullback as the market entered deeply oversold range. 3440-50 area also corresponds with 23,6% Fibonacci retracement, which will make this level more significant (today's high established exactly at this retracement).

Intraday timeframe shows, that the futures did not actually retrace back to yesterday's low and made a higher low, implying quicker reversal. 3440-50 resistance is now the nearest upside price target. Returning above this area will trigger next most probable resistance point, which corresponds with 38,2% Fibonacci retracement of current decline. If the price does not return above 3440-50, then I would expect much quicker retest of the august lows. Combined with increasing open interest, such situation would definitely imply, that new money is coming into the market, supporting the short side, eventually extending downtrend in the longer term.