Sunday, August 10, 2008

10/08/2008

Futures analysis
The market says "no" and we have to wait a little longer, in order to see eventual extension beyond 2800 level. In fact it has not been retested yet, which might indicate, that the futures are not strong enough yet to go that far to the upside. So far, we have seen a 3-day decline caused mostly by negative sentiment related to earnings report season. The longer term pullback ended up finding resistance area between 50- and 100-day moving averages, but did not violate itself enough, to say that we have a continuation of the whole bear market. Wednesday's window (shown on intraday chart) did not hold as a support and was finally broken on Thursday. Though, the futures ended up posting a reversal bar (doji) exactly at rising 20-day moving average, so it might be a pullback within a pullback, which may lead to another test of current month's highs. Upcoming week will bring us some data from the U.S., which will cover housing market, retail sales and monthly CPI. This is going to influence the Dollar, which is already strengthening. Fed Funds rate is so far expected to remain at 2% throughout October, which is rather bullish for american currency. More bull market in Dollar means bull market with little delay in stock markets.
As you can see on the intraday chart, the futures only managed to retest a high of 31st of July, but were not strong enough to post a sustained move above it. This is a classic souble top pattern, which started this recent 3-day sharp decline. Wednesday's window was tested twice until price managed to break through. It has become a resistance level and the futures have to get above it again, if we are to see further upside action. Market is range-bound again, this time between 2600-05 and 2665 area - the most significant intraday support and resistance for upcoming week. Remember, that lower range band corresponds with rising 20-day moving average, so any emergency support level remains only near 2570, if current is broken. Breaking below 2570 means going down to 2450 again. Watch intermarket action carefully now, as we have newly established patterns in daily timeframe. Crude Oil showed weakness, which can lead it back to 100$/barrel and EUR/USD posted a double top, that was the main cause for establishing a new trend supporting Dollar. I think we are seeing the last of subprime writedowns. Now we have to concentrate on economic slowdown, which is coming to Europe (Spain so far).

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