13/05/2008

Futures analysis

Finally, a retest of declining 100-day moving average occurred today. As you can see on the daily chart, the price touched it and formed a hanging man candle, indicating a possible short term reversal. This is not unexpected, as the market now has some room to gain strength, if it is ought to go further upwards. The futures have entered the main long term resistance area, which consists of previously mentioned moving average and the level of 3070. Upcoming days will be crucial, because we can see confirmation in both ways (upside or downside) and even false breakouts. So if the market confirms today's hanging man, we will have to wait for a possible higher low to develop, because price can bounce back from there and gain enough momentum to breakthough the main resistance. On the other hand, if we witness a solid break above 3070, provided it will be a sustained volume-supported move, then we must pay close attention to 3070 level, because it should become a support afterwards. The rules are simple - wait until you see a confirmation and then plan you entry. It is always too risky to trade at market's key psychological areas, because it can go both ways on a single catalyst, that changes sentiment.

Yesterday I stated, that I do not expect any breaks above recent intraday highs (3040-45 area in this case), because the U.S. stock market had already discounted data, which considered retailers' earnings and overall performance. Today's session happened to be no other and macroeconomical announcements affected the currencies only. Though, as you can see on the intraday chart, the futures acted different in relation to what I expected. Yesterday's uptrend in american stock market caused an upside gap here in WIG20 contracts, but as they opened near the nearest term highs (3040-45), the price immediately posted a reversal pattern and declined from there until reaching 3015 (yesterday's support). Then, 3015 prove to be solid enough, to keep the market above it at least for one more day. At about 14:00, the futures began to retrace back and managed to retest the resistance of 3040-45, but then posted another reversal pattern. Now, here is the picture of possible upcoming action: The States slightly declined today, remained in the negative territory, but managed to slowly recover in the second half of the trading session Technically, the Dow and S&P have defended two levels of intraday support and closed above them If these factors do not change overnight (watch the currencies), then I do not think, that today's intraday double top pattern in WIG20 futures will be immediatelly confirmed tomorrow (3040-45 resistance) If the futures violate 3015, there is still the gap level of 3000 and prior intraday highs near 2990, that should hold the market in case of highly negative sentiment caused by american stocks