28/01/2008

Futures analysis

Back to the downtrend. The futures did not manage to break through declining 10-day moving average and additionally confirmed previous hammer candle, thus indicating the end of the long-awaited pullback. Today's price close has broken two previous days' lows, which implies more selling again. The whole daily pattern, that began to form after gap from 3070 has not turned in a sharp bottom so far and will remain unconfirmed until the price breaches through 3030 with no bull traps. Now, the most significant price target in the daily timeframe appears to be 2700 again. Apparently, recent rate cut by the Fed was barely noticed by the global markets, as well as by WIG20 here. Sharp correction, that we recently witnessed, developed on diminishing volume, which is still declining, so that would be another sign of weakness driving this market more to the downside.

The futures posted a 70-point downside gap on the open and basically remained in a sidetrend for the whole trading session. As the crucial swing high of 2950 was breached to the upside by an overnight gap, it failed today in exactly the same way and its level will be acting as a resistance from now as it did today. Lower band of the price channel lies near 2925, which is prior level of support, that has been established throughout the recent emotional mayhem in the markets (volatile days). Buying evidence, that I was recently pointing out, turned into selling evidence, as the moving averages crossed to the downside, causing failure of a triangle, that I indicated in my previous analysis. Still, the States are trading for rate cut again, resulting in nearly 1% gain by the major indexes so far. Now, we have to wait, in order to know the market's opinion on the second cut. Fundamentally, more rate cuts mean more inflationary pressures, but psychologically, the markets may shift in the short term.