15/07/2008

Futures analysis

Awaited retest finally occurred today, as the futures posted a downside gap in the morning and declined to reach 2450 area - low of May 2006. It is sort of odd situation, because the market posted actually a continuation gap near the crucial support instead of exhausting itself, which would signal an early short term reversal. Nevertheless, the close lies below 2450, so we have to wait for a confirmation, in order to consider current level a significant pivot point. In the wake of recent market momentum, this could even firstly become a resistance (tested and confirmed from the downside) without stopping/stalling or pulling back. Volume has reached the highest levels since the last week, so it is possible, that the futures are nearing a selling climax. Our benchmark (the States) declined today after previous announcements on Fannie Mae and Freddie Mac, which spurred concerns about economic growth and inflation. It can even get more pesimistic tomorrow, after data on industrial production and core CPI.

Intraday chart shows, that the futures were not strong enough to reach above even previous day's low of 2477. Decline, which started an hour before the noon reached to a support of 2420 - long term level. You can also see, that the market tested 2450 primarily from the downside and later posted a bull trap even, which is not a good forecast for any bulls. 2420 acts as emergency support for tomorrow. Any price action below this point has greater odds for continuation than reversal. 2450 will serve as a pivot point for the next two days, in my opinion, unless the market becomes so weak, that it will be unable to reach back and retest this level. My stance for tomorrow is bearish. American stock market tried to recover today, but eventually posted a double top pattern at resistance marked by previous day's lows and remained in a sharp downtrend all the way to the close. S&P500 futures have 14 more points to retest today's lows and this current move is likely to be continued at least just after opening tomorrow, that is why I think WIG20 futures will follow.