20/01/2008

Futures analysis

The last two sessions posted more downside spikes, thus validating the Doji candle, which appeared on Wednesday in the daily timeframe. As for the geometrical levels, the price ended up its 13-day decline exactly at 261,8% Fibonacci projection of previous upswing, that corresponds with prior support/resistance level - 2890. Finally, the futures stalled at least for a couple of days and maybe we will see a pullback at least to 3130, which appears to be the closest most important area of resistance. Recent information on fiscal stimulus policy in the U.S. was supposed to cool panicky selling in the global markets and it worked so far. Though, as you probably know, injecting another 150$ bln into the economy will cause even more inflationary pressures, which does not change my long term bearish view of this market in any way. If 3130 is breached, then I think the pullback might reach to retest even August lows, which correspond with 161,8% retracement of the same upswing as before.

5-minute chart shows, that evidence of buying, which I pointed out on Wednesday, was confirmed actually on Friday. Thursday posted a retest of the most recent intraday lows and ended up posting another bear trap (plotted on the chart), what more accurately confirms recent short term reversal. The price moves still mostly sideways though. This shows, that the buyers are still fighting to get back and drive the price back up to some more significant resistance areas, so the recent action here in WIG20 futures is caused mostly by exiting short side traders. As for potential upside targets, that emerge from intraday data, the nearest appears to be the close of 15th January. Reaching this level will entirely fill the 90-point downside gap, that eventually (now I can say this having advantage of the hindsight) indicated price exhaustion. 10 days remaining to Fed most probably cutting rates by 50 basis points, so it will be probably the best time to get into the market on the short side and ride the long term downtrend.