19/07/2008

Futures analysis

The futures managed to get back above the key long term support area of 2450 by posting a two day sustaied rally. This short term reversal was caused by a huge trend change in Crude Oil, which fell for the last three days, fueling rebounds of global stock markets. The most important factor now, is that the whole pattern in daily timeframe (Crude) indicates important reversal, which will mean, that we are probably going to forget about inflation for the next couple of weeks even. As for WIG20 futures the nearest upside target, if the pullback continues, appears to be near the last swing high of 2600. This is strictly for short term only, I do not know how strong is the market yet, to judge if it is capable of going any further. Hopefully, upcoming week will show us, whether buyers are aggressive enough to drive the futures further upwards. Short term catalysts for Monday are two important announcements from America. First is the ever-volatility-causing Beige Book and New Home Sales, which are expected to be little better than previously. Watch these two carefully, as unexpected data values will probably set short term sentiment for the global stock markets.

As you can see on the intraday chart, the futures gapped up on Thursday and thus confirmed previously defined support area between 2407 and 2417 (check my last post). More important fact here is that price found and confirmed support at the long term 2450 level, which was my primary requirement for an uptrend to begin. Friday was more volatile, as we had indecision in the Crude Oil, that finally collapsed at the end of the day, causing stock markets to post rallies before closing. As for Monday, the nearest support and resistance levels are plotted on the intraday chart to the left. First is of course the last downside window level between 2477 and 2500, which will act as a primary support zone. If the market confirms it and bouncess off, then comes a resistance area between 2525 and 2540, which consists of previously established intraday swing highs and lows. According to my rules, now I should set my stance for the next session, judging by american stock market's close. The last trend in DJIA and S&P500 is to the upside, which is likely to continue, but my concern is, that indexes closed near important two-day resistance, which may still be rejected. My stance thus is neutral/bullish. The futures are above supports, have some room for any potential upside action, but still might remain in a sidetrend until American opens. I would not be surprised, if conclusion came late in the day.