12/08/2008

Futures analysis

The market managed to stay above rising short term moving averages, indicating that current action might still be a pullback within a pullback. Today daily candle's close exceeded previous two days' highs, leaving some room for potential upside action. Though we are below January lows (2680), which is more significant longer term level, giving price solid resistance. Earnings season reports from the States cause overnight sentiment shifts in global markets. This explains why stock markets have been in decline mode lately in spite of falling Oil prices. As for WIG20 futures, getting above January low level will be more reassuring in confirming short term trend change to the upside. Otherwise, if price retests recent highs just below 2800 area and fails to exceed them, then it will mean, that we are back in the main downtrend. The futures have recently entered a contraction area between moving averages, so it is rather an indecision period than early signs of swing low confirmation.

Wednesday window level (plotted on intraday chart) has become a very significant intraday support/resistance area, which is constantly tested by the market. The swing low near 2600 is our emergency support, meaning that breaking below this zone confirms bear market continuation. This is swing low of the main (daily) correction. In the intraday timeframe you can see, that recent upside action, that took place after retesting 2600 could be also a corrective wave, as we have seen a double top pattern earlier (upper area of the chart). If we are to retest this double top near 2780-85, then the futures have to get above Wednesday window level and confirm it as a support again (current swing high). Otherwise, the price will remain range-bound between 2600 and 2660-90 (indecision). Tomorrow comes out significant news covering U.S. retail sales, which often moves the Dollar and thus, fuels intraday sentiment in stocks. The States closed today in a down trend, posting no signs of reversal late in the day, so my stance for tomorrow is neutral/bearish (given lower expectations for retail sales too).