21/07/2008

Futures analysis

The pullback continues and it has managed to last three days, which was enough to retrace back almost to 2600 - the last swing high in this downtrend. My stance for today was neutral/bullish, because I was not sure about american stock market's action, due to its yesterday's closing price near two-day resistance. As you can see, throughout practically whole trading session today, the buyers went aggressive and caused the market to post a huge momentum rally, which lasted all the way to the close. You can also see, how market's sentiment can confuse many traders, by rejecting intermarket technical principles. For the whole day, traders were betting along with rebounding Crude Oil, which caused Exxon and other industrial companies to rally before opening bell in the States. As, you can see, the fact that Exxon produces only half of its then-sold petroleum does not concern many players in the market, which sometimes causes such correlated movement between stocks and Crude Oil. Nevertheless, the Oil finally rebounded and it seems, that another session would be an intraday turning point.

Intraday chart shows, that even if the market opens above previous day's highs, it can post a huge 2-percent rally and retest key levels from the last week. The futures managed to get above important swing highs, practically with no looking back. Now let's see, how current situation can evolve. The States posted a decline today, which was a result of arbitrage profit taking from European session. It was a single day today, when every other stock market preceeded America (not the opposite as usual). Trends in S&P and Dow Jones are naturally down, but both of these indices managed to post an intraday double bottom pattern, which could change things here (but not necessarily). My bet for tomorrow is a correction, either sideway flag pattern (if the futures preserve momentum), or more sharp pullback to 2555 or even 2535. These are primary and secondary support areas respectively. Oil is currently rebounding after falling 11%, so we have to wait on the sidelines, in order to see, how current situation is going to develop. The only market, that did not forget inflation are american bonds, which have recently turned bearish again. Oil is the key now, so watch it carefully, because then you will be able to gauge for how long the stock market is going disregard inflationary pressures and how big current pullback may become.