29/07/2008

Futures analysis

The pullback has slowed down, but managed to stay relatively intact after some overnight sentiment catalysts, that stopped out just minor traders. As you can see on the daily chart, the futures are nearing declining 50-day moving average, which is now corresponding with January low of 2680, creating much stronger potential resistance. Given current market sentiment, this level could be tested tomorrow, because of as little as 20-point gap, that separates the closing price from this area. Tomorrow starts the news streak, which will setup sentiment for the next week. First comes ADP nonfarm employment change, which is slightly less considered sister of actual nonfarm payroll announcement. Then, late in the day, we will learn about Crude Oil inventories, that will influence intermarket action (having in mind oversold Oil futures). Unfortunately for Warsaw Stock Exchange, it is coming out after the closing bell, so any drastic change in sentiment would probably result in an overnight gap next day.

Intraday chart shows, that the futures are struggling to make new highs, although price does not move sideways much. Recent movement has been volatile, which is caused by betting before important news (this explains rapidly changing sentiment and gaps). Today's session was bearish overnight again (just as Monday), turned to strong bullish just after the open but barely made a new high before closing. January low is just 20 points away and completes a resistance area along with the most recent level of 2660. Given today's action in the U.S., my stance for tomorrow is naturally bullish, at least for morning part of the session, before announcements come out. The States posted a strong uptrend, that did not show a reversal pattern before the close, so I would even expect an upside gap on the open here. If the gap exceeds 2680, then look of the price to find support in this area at least to 2660. If it does not prove as a significant level, then the market could have some trouble breaking above it in the future. Remember, that the best confirmations occur when markets post sustained moves (pure volume-backed price action; no windows). If price manages to stay above 2680, then the pullback could extend to even 2800 in the intermediate term.