10/04/2008

Futures analysis

Sideway price action near 3000 remains unresolved as the futures again try to reach below this key psychological level before making a decisive move either way. At this point, we might want to consider this particular pattern as a lower high in relation to a similar pattern, that formed in the second half of February and found resistance at the area between 3125 and 3260. Value of the recent peak is exactly 3084, so unless the futures break above this point, the downtrend will continue to punish any remaining bulls, as a lower high implies weakness in the market. Trade balance and treasury budget data did not appear to put much pressure on the stock markets, as it did in case of currencies and american treasuries, causing some volatility. There has to be another psychological catalyst, that is going to fuel the next move here.

Since my last analysis, the intraday support zone between 2970 and 2990 has been tested twice, as you can see on the intraday chart. Wednesday opened barely near upper band of this area, but eventually, the futures posted a reaction rally after two consecutive days of decline. Today's session has put an end to this rally, by completing a double top pattern near yesterday's high. This led to a sharp decline just minutes away from the open, as the price quickly gained momentum. Now, 3000 appears to be the nearest significant resistance, which could be penetrated even tommorow, because the futures are moving in quite tight contraction range and could break out in any direction, depending on overnight action. American indexes rallied today, but eventually posted a top formation and began to decline from there, so that may put the sellers in control again here in WIG20 futures. Any sustained move below 2970 will confirm double top pattern, that has formed throughout the last week (seen at the top of the chart).