30/03/2008

Futures analysis

The market retraced back to the main long term resistance area between 3000 and 3075. The last session from Friday posted a hanging man, exactly touching the lower band of this crucial zone. If that is confirmed on Monday, it will reject double bottom pattern, that has developed over the past few weeks and will indicate continuation of the long term downtrend. The odds favour bears, because of negative close of american stock indexes (Friday's session). If market's opinion is changed, it will drive the price back above 3000 and then 3070, then I would look for current pullback to extend here at least to retest the February peak.

Intraday chart shows, that the futures formed kind of two separate trading ranges and established key short term resistance and support points. You can also see, that actual buying phase took place late in Friday's session. That would be the main reason, if the daily hanging man is rejected. Price managed to close above 2980, which is inside the upper consolidation range. Nonetheless I retain my bearish view for Monday. There are two reasons for that, coming just out of the intraday chart (excluding market sentiment caused by negative close in the States and daily timeframe patterns). Firstly, the futures have recently formed a double top pattern at 3015 with an upside spike bull trap, which still remains confirmed. Secondly, this whole late action, that drove the futures back above 2980 was preceded by a long upside spike, that remained unrejected by Friday's close. Now, in conjunction with the market sentiment and daily patterns, this appears to be just another bull trap, which soaked some sidelined money in and acts as a good setup point for eventual shorts. Unless this Friday's late double top pattern is rejected on monday (by an upthrust candle for instance), the futures remain in downtrend.