Thursday, June 19, 2008

19/06/2008

Futures analysis
The flag pattern, that I previously outlined was broken on Wednesday, but the market did not manage to breach the most important support area, marked by January low. Now, that the futures bounced back off this zone, we have two interesting candle patterns in the daily timeframe, which form a short term double bottom. The double bottom consists firstly of a piercing pattern (completed on 12th of June) and outside bar bullish engulfing pattern (completed today). Such alignment confirms a short term trend reversal and could evolve into a long term signal. That is because current formation corresponds with January low and in conjunction with it, might be viewed as a triple bottom. But that is a very far fetched picture and cannot be dwelled on, unless it is close to be confirmed. Right now, the futures retraced back a little after reaching quite oversold state, by pulling away even from the quickest moving averages. So far, previously mentioned news catalysts (housing and inflation data) have not proved to be significant in the longer run. Overall market sentiment only might influence daytraders.
On Wednesday, the futures declined and managed to exceed initial price target of 2680 to the downside (I mentioned it in my previous analysis). The bottom started to form, when the market reached 2670 area and was confirmed after reaching 2655-60. Just minutes after the open today, there were couple of bear traps posted, which sucked in remaining sidelined money and finally confirmed a reversal. Remember, that June contracts expire tomorrow, so current euphorical buying could be artificial, not actual event driven. Friday's session thus might also be bullish all the way, considering that american stock market indexes are behaving in similar way. My bet for Friday is that the futures will probably reach 2740-50 resistance area, which is the closest level, that consists of the most recent price highs and lows. This is just initial upside target, because it is hard to judge, how volatile the market may become, when most of price action is caused by switching to another series.

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