22/03/2008

Futures analysis

Back on track with new motherboard after almost three weeks of waiting. And it so happened, that my analysis will be the last of the March futures contracts, as they expired. From now on, we will move on to June series. My last analysis covered price action, that took place yet inside of a descending triangle formation, which was broken just one day before I had to service my computer. I stated, that if the futures get back below 3000 level, then it will definitely mean downtrend continuation. The market only managed to pull back a little to find resistance between the declining 10- and 20-day moving averages, which is a natural corrective pattern. We also had an attempt to retest January low, but the price eventually stalled little higher, than the actual low. Fed has lowered interest rates to 2.25, causing some bullish volatility, but as you can see on the daily chart, so far the futures have not been able to retrace back above the moving averages. Moreover, the last two trading sessions posted a doji and an inside bar inverted hammer, indicating short term level of resistance near 2890 and current pullback's end.

I will cover only the latest price action in the intraday section, as I was not able to do an up-to-date analysis. Anyway, if previously established key intraday points are yet to play a significant role in case of extended uptrend, I will point that out. Now, as you can see, the futures became range-bound between 2900 and 2835, which in the wake of short term upside action acts just as a corrective/consolidation pattern suggesting continuation. It also contradicts with daily patterns, that I described as reversal-indicating (doji and inverted hammer). We have to wait for a confirmation. Doji and inverted hammer will become rejected if price comes back above 2900 with a sustained move (must not be a bull trap). On the other hand, they will be confirmed, if the futures break through 2835, which must eventualy become resistance. Breaking through either side leaves relatively little room to advance or decline. The nearest resistance in case of upside breakthrough appears to be at a point, where the last gap occurred. The nearest support in case of a breakdown lies near 2800, where the gap ends. The market has become more choppy, due to various Fed actions and news from companies, so the long term downtrend will progress much slower than earlier.