26/04/2008

Futures analysis

Daily low of 2815 was defended on Thursday, so the market somewhat avoided a sharper decline to retest the lower band of symmetrical triangle, that has been developing over the last few weeks. On Friday, the futures managed to pullback a little and found resistance at the declining 10-day moving average. Current price level corresponds with the middle line of triangle (2890), that I named as a key pivotal point inside this whole pattern. As you can see, it has been tested for a number of times, which only confirms its significance here and indicates mid term market indecision. Although the nearest short term support (2815) is defended, technically we are still in a downtrend in the daily timeframe. As long as the last lower high of April 21st remains unviolated, I cannot consider this double bottom pattern, that formed at 2815 as valid.

Thursday appeared to be a bullish day just as I expected. The futures confirmed a bottom at 2815 and bounced back from there, along with the global markets. Despite one quick decline, this two-day uptrend has maintained its momentum until it reached 2910 yesterday. My bet is that the uptrend is going to continue on Monday, or at least will not change to bearish in one single session (depending on the global markets again). The question is, if the Dollar bounces back further in relation to low-yielding currencies, would the stock markets follow in the same magnitude? As for WIG20, the price has to post a sustained move above 2910, in order to reach further to the upside and retest prior level of 2970. This could be my price target for the upcoming week. The States closed in an intraday uptrend on Friday with no signs of turning back (the market managed to gain much momentum). Usually, when the trend changes in the second half of the day, it is continued on day after that. Technically, the price did not exhaust itself on the upside yet, so you have to be aware of the news catalysts, that could turn the trend to bearish. On Monday, there will be short term bill auctions in the U.S., which are a reliable and most importantly leading indicator of future potential interest rate changes. As for Europe, the only significant announcement appears to be monthly CPI in Switzerland. These are potential catalysts, than can change the short term picture of the stock markets on Monday from what I wrote earlier.