06/04/2008

Futures analysis

The futures have not moved very far since my last analysis. The market is still fighting through major resistance zones as it tries to retrace back to the declining 100-day moving average. Unfortunately, if you want to get involved on the long side in higher timeframes than intraday, you have to be aware, that this whole action since January lows has been developing mostly sideways. That is, current volatility has not changed significantly, which forces traders to take higher risk. America has recovered a little lately, due to a couple of positive macroeconomical data, that changed short term market opinion on expected recession. These recent announcements came along with significant technical signals, as the Dollar became very oversold and commodities posted a long term top. As for WIG20 futures, the more the Dollar will be retracing, then higher the chances are, that they will retest another major resistance area, which is between 3125 and 3260 in alignment with 100-day MA. Watch price action when in that important zone as it will determine time for the next downtrend leg to form.

In the 5-minute timeframe, as you can see, the futures managed to bounce back from 2920 and rallied for two days until forming a triple top pattern just above 3050 on 2nd of April. On Friday, in the wake of better than expected data on non-farm payrolls, the market began to retrace back to 3050, but ended up closing just below intraday resistance zone, which is plotted on the chart. Early days of the next week will probably bring us a retest of this triple top, unless market's opinion is changed by unexpected news. A sustained move above 3050 will indicate more upside action in the nearest future. Also, breaking above 3080 will be a good confirmation, that the price has enough momentum to pull back and retest declining 100-day moving average. Be careful before going long here as current intraday resistance area has to become a support if the market is ought to go higher, that is minimum requirement. A close below 3020 will indicate either that any further upside action will take more time and will be much weaker (sideways) or may fuel even earlier reversal.