11/04/2008

Futures analysis

Finally a decisive move in the futures, or is it? The sideway price pattern, that has been forming throughout the last couple of days became confirmed today as a lower high. Situation here starts to look more interesting, as this whole consolidation, which started from January low begins to form a symmetrical triangle pattern. But obviously, I cannot consider it as a downtrend continuation until the lower band of this triangle remains intact. As you can see on the daily chart, the market stopped at a prior support level, which is around 2880 and appears to lie near the middle of triangle. This will be our reference point, as movement either way from there will increase the odds for eventual confirmation or rejection of this whole pattern. If this level is defended, it will mean more sideway action and possibly further contraction. If it is broken, then expect the futures to retest lower band of the triangle.

As I pointed out in my last analysis, the odds for today favored bears, as there was intraday trend change in american indexes late in yesterday's session. Though, WIG20 initially gapped up, but opened near previous day's high, which is usually a fade candidate. This morning action again confirmed 3020-45 zone to be important intraday resistance. A fierce decline started from there and managed to surpass another important area, which is the support between 2970 and 2990. The futures gained so much momentum, that there was not any particular point, where the price would start an actual pullback. This is a good example of a sustained move, that I have been talking about in my posts recently, because chances for retesting 2970 from the downside shrinked very quickly because of such sharp decline. It will either take more time, if any retest is going to occur, or this market will become so weak, that it will be incapable of reaching back. Last week's double top pattern is confirmed.