30/06/2008

Futures analysis

Still no signs of pulling back, at least in the daily timeframe. The futures have gained so much momentum and are entering the most crucial long term support area already. Crude oil hit the record today, but reversed, causing the stock markets to rebound a little. There might be some evidence of buying, as you can see on the intraday chart, but unfortunately for the bulls, it is not going to last longer than a single day or two. Tomorrow will probably bring more volatility to the global markets, as there is going to be a whole lot of macroeconomical announcements throughout all timezones. Although every single one will affect the overnight Dollar (O/N from american perspective), the one we should pay attention to is coming from the America itself - ISM manufacturing index. As it is expected to be lower than previous reading, I assume, that american stock market has already discounted what is about to happen. If you look at the chart of Dow Jones Industrial Average, the trend changed to downside again before the close (analysing chart from right to left), though all of the indices rallied in the morning.

Volatility came back and has driven the futures market throughout the last three trading sessions. Every single day, price posted sharp corrective moves to the upside, but that eventually showed no sustained evidence of buying with little odds for changing even short term market sentiment. After breaking down through 2605 support area, the futures found it a resistance already on Friday. It did not take long for the market to reach new lows after that, which were not able to hold back the price and prevent from reaching further downwards. Today's new minimum has been established at 2555 and will naturally act as a 'support of last resort' at least tomorrow. As you can see on the intraday chart, the futures managed to bounce back from 2555, retraced all the way to Friday's close, but showed not enough buying, that would force the price further. I only marked the most significant intraday resistance and support zones on the chart, because there are numerous levels, that emerge just from previous price swings. And in this current case, when there has been a lot of volatility lately, the futures will probably retest each one of these areas, which are of similar significance. Means, you have to watch the tape closely, in order to anticipate, which one of these levels will appear as the most important.