23/01/2008

Futures analysis

Volatility is the main part of the bottoming process, so we had another wide ranging day today in WIG20 futures. Although daily candle is not a typical hammer, this long downside spike was a result of buying, which took place late in the session (explained in intraday section of the post). Also we have short term trend reversals in major pairs with the Japanese Yen, indicating return of the appetite for risk, driving stock markets to the upside again. Daily chart shows short and mid term potential resistance areas/upside targets, that are previous important turning points additionally corresponding with Fibonacci retracements (plotted on the chart). As it appears, if the price goes back above the 38,2% retracement, there would be two resistance zones remaining, until it returns to the downtrend. 50% and 61,8% retracements are swing trader's potential reversal points, as often market's opinion changes when approaching these key geometrical levels. 'Potential' means, that there is no 100% probability, that the price will bounce off of one of them, with no looking back or failure, but these are rather zones to pay attention to.

Intraday chart shows how the buyers came back late in the day, which was caused by the open in America. As the price continues to form a bottom, recent intraday action also lines up properly with Fibonacci retracements, while the buyers consistently try to regain the lost ground. Buying evidence, that I was recently looking for was tested yet again today, as the futures fell below 100-period moving average to eventually find support at 61,8% Fibonacci retracement of the latest upswing, which started the whole bottoming process. Now, as the global markets finally retrace back to previously broken support levels, I am expecting a pullback at least to 3050, if price breaches the swing high of 2950, then come the daily targets. Tommorrow's macroeconomical announcements from the States cover Initial Claims, New Home Sales and Crude Inventories, always acting as catalysts, causing volatility and determining the market's opinion on condition of american economy. Although fundamental factors are known for the long term, I always mention upcoming news, because it influences short term emotional state of the markets, which determines potential range of such pullbacks, as we are recently witnessing.