23/07/2008

Futures analysis

The futures managed to exceed 2600 resistance area, by posting an upside window. The next resistance area is of course January low of 2680 (daily) and there are only 50 points left along the way. Current rally has been very sharp so far, as you can see on the daily chart, which shows how exhausted the market had become earlier, after declining actually from 3000 level. Huge downside momentum caused a V bottom pattern to form and squeezed all the shorts, that entered too late (on bear trap below 2450). I do not know, for how long the markets are going to forget about America's recession and thus, how much strength can current pullbacks gain. Nevertheless, WIG20 futures will remain inside 2450-2680 range in the nearest future. A sustained move above 2680 could lead to retesting even 2800, but that may be an optimistic forecast on my part, considering overall weakness. Tomorrow and Friday will include data on american housing market, which is actually the most relevant in terms of influence on market sentiment.

Tuesday posted a sideway correction pattern, which I expected in my previous analysis. The market managed to preserve its momentum and that resulted with an upside window, today's morning. As about 50% of the move was doscounted overnight, WIG20 futures moved only 30 points to the upside and found daily high between 2600 and 2660, which are now key levels of support and resistance respectively. Given today's price action in the U.S., the market could again act a little neutral on Thursday. The States showed a volatile session, closed positively, but did not form a clear trend either way, which makes it harder to forecast. Though we are still in unbreached uptrend, so the odds are in the bulls' favor. If the futures are to post any sustained moves yet, the best way would be to gain strength by pulling back to this rising trendline, that I plotted on intraday chart. Such price action would discount States' indecision, but also give room to gain strength required to rally further.