15/04/2008

Futures analysis

The market battles near the middle line of symmetrical triangle pattern as I was recently indicating. Two last daily candles are doji and a hammer respectively, confirming a corrective pattern of the most recent sharp decline, that took place on Friday. Current corrective patterns may last probably until the end of this week, as today U.S. stock market finally rebounded, accompanied with massive rally of the Dollar against low yielding currencies. This middle line is now key pivotal point for daily timeframe, in terms of potentially resolving whole pennant formation. From now on, I will closely monitor the volume and open interest, so we can get the idea of whether current price action is just a corrective pattern or longer reversal. If volume continues to diminish as the price increases, then it will become quite clear, that the futures are accumulating momentum before making the next move.

Intraday timeframe shows a clear bottom pattern, that has formed over the last two days. On Monday, we had this final downside leg, that confirmed exhaustion and then, the futures formed a sharp bottom pattern, which was confirmed today just minutes before the close (price has exceeded both intraday highs). Now, there are two obstacles on the way up. First comes 2913-30 resistance zone, which was barely tested late in the day. Secondly, if the price manages to get back above this area, then I will expect 2970-90 zone to be retested. These two zones are separated by just 50 points, so theoretically could be touched in a single trading session. Volume and open interest are the factors, that will determine price action for daily timeframe. The key factors for lower timeframes are obviously two resistance areas, so trading activity should be monitored closely when price tests any of those, in order to gauge market sentiment earlier.