16/11/2007

Futures analysis

Today's session posted a doji bar in daily timeframe, suggesting short term bottom may be forming. The price reached 3453, which is actually prior support level from may and september, as you can see on the chart. We are currently entering another support zone that is theoretically supposed to slow this market. Though I expect a slowdown in the short term only, because of ultimate price target for the futures, that is - august lows (forecast from measured move, check out yesterday analysis). Unless something 'better-than-expected' happens, the global markets are rather meant to decline on weak macroeconomical data coming from the United States. Rising commodity prices spur inflation, which will cause consumers to reduce spending for consumption and eventually drive the economy into recession.

The bad thing about today's session is that selling occurred late in the day, not initially. That puts more pressure to the downside obviously, but nonetheless, increased volatility, causing fast and sharp moves may imply forming of a short term bottom. At least, in relation to previous two-day action, that took place on 9th and 12th of november, this is similar pattern. The open interest flattened for a short period, indicating indecision, which is also parallel to previous case. As for now, there is little evidence of actual buying and situation will remain this way, as long as the market stays below its nearest short term resistance - 3543, plotted on the 5-minute chart. Don't try to pick a bottom here. Wait for some confirmation, such as higher lows, or retests of 3543 level. That will indicate upside potential.

15/11/2007

Futures analysis

Another day of decline in the futures. This time, the price fell over 2% in relation to yesterday's close. Weak pullback suggested, that this market is not stopping yet and current sharp decline will extend probably to reach august lows, as plotted on the daily chart. Though, short term support levels, which I outlined yesterday, remain the same - mid-term price target changed. The global markets are declining, because of weak macroeconomical data coming from the United States indicating slowing economy and that is basically what are we going to see in the upcoming weeks. It is actually a delayed reaction of stock markets for rallying commodity prices, that create inflationary pressures.

5-minute timeframe tells, that previous important geometrical level was broken - 76,4% retracement. Now, that there is no significant support, the market is on the way down to reach the initial rally point of 3440. The only barrier to break is the intraday low of 3477. As Dow futures went -1% today, it is questionable whether the market is going to surpass 3440 tommorrow, because of large chunk of today's american decline has already been priced. Notice, that the open interest is still falling, which means money is coming out of the market, so we have not actually witnessed opening of new short positions yet. The declining prices are fueled by quitting of the long side.

14/11/2007

Futures analysis

Today we had another decline in the futures. The market gapped up in the morning as a result of yesterday action in the United States, but then it erased nearly all of yesterday's gains. Resistance, that I pointed out yesterday (3640) was actually violated from the upside today, but eventually remained as such, judging by the price action, late in the trading session. Moreover, intraday high of 3667 established at another resistance, creating an actual area, which the price will have difficulties to break (3640-3670). The nearest support level for the daily timeframe would probably be the 61,8% Fibonacci retracement of this August-October rally, which corresponds with some prior support from April. If that fails, then the emergency level, would definitely be the 76,4% retracement, which also corresponds with prior support, but from September. These are the potential levels, that might cause some people to stop selling. It does not mean, they will prove as support for sure. Look for evidence of buying in the lower timeframes.

In the 5-minute timeframe, today's price action posted a typical ABC correction of prior rally. Intraday high corresponds with prior support level near 23,6% Fibonacci retracement, which is plotted on the chart and became short term resistance. That rather favours further declines in this market, meaning that we are probably going to see another retest of 3554 support tommorrow. The more a particular support/resistance is tested, the more it is likely to fail, so expect another long squeeze below that level. The open interest still has not recovered, nor even flattened, so we still have massive long exiting, driving this market lower.

13/11/2007

Futures analysis

Finally we have reaction in this market. Today's session was definitely influenced by american indexes, which rallied on better-than-estimated earnings report of Wal-Mart. Yesterday's inverted hammer proved to be a reversal candle and the price retraced back even above friday's close, so after a sharp decline, we have got a sharp pullback, which will probably extend at least in tommorrow morning, because part of american rally has not been priced yet. The market retested from the downside the latest significant level of support in daily timeframe, which is 3645 obviously. This is definitely a turning point as for the short term and tommorrow's action will show, whether it is going to remain as resistance or not.

Intraday triple bottom was confirmed today, so 76,4% Fibonacci retracement remained as this significant level of short term support. The futures retraced back part of the last two-day 'exhaustion decline' as I call it, but found resistance at 61,8% retracement with flattened open interest (indicating rather indecision than actual return of the buying force). Now, the question remains: is this market strong enough to pull back to at least 3700, because such action could trigger mid term bottom to form itself and increase the odds for reversal. Remember, that the moving averages and Fibonacci levels are potential levels of support, which means that it is not yet safe to buy there. So do not try to pick a bottom in such sharp declining market, wait for the evidence of buying, by checking lower timeframes.

12/11/2007

Futures analysis

In the daily timeframe, the futures posted today an inverted hammer near yesterday selloff's low. The open interest is still declining with higher than average volume, so clearly this sharp decline continues with little chances of pulling back in the short term. Although an inverted hammer candle indicates a potential reversal in the market, today's action in the American indexes puts up rather contrary stance for tommorrow. On the daily chart I plotted some levels of support of similar significance. Two previous from early and mid october have already been broken by the price, which initially started this bear market. The nearest downside target will probably be the 3420 area, which is a support of even more significance.

5-minute timeframe shows a short term triple bottom, that formed in the past two days, but that does not indicate a reversal yet. Moreover, the price fell to 76,4% Fibonacci retracement and closed actually below it, showing even more weakness with potential to retest 3440, where the rally started. Open interest declines along with the price, beating the remaining bulls and posting still lower highs. The only reasons that support the buyside are following: The decline has already made three downside overnight gaps, indicating that the price is exhausted Market stopped at significant geometrical level, which in conjunction with above, might suggest at least that this sharp decline should slow down

UPDATE: The Dow futures closed as an inverted hammer also, with a 0.44 decline today, so it may indicate, that we are slowing down.

09/11/2007

Futures analysis

The futures sold off again today. Long shadow on the daily chart indicates a possible short term bottom forming, but monday action will strictly depend on the close in America, which is again highly negative (-200 points in Dow Jones). Also, have in mind, that the slowing american economy might finally cause crude oil price to decline, as lower consumer income will decrease overall demand for gas. Nearest downside target in weekly timeframe for crude oil is around 80$ a barrel, which might push the stock markets up. Now we have to wait and see whether WIG20 futures are yet strong enough to even pullback and reach this broken 100-day moving average, because then we will be able to determine the condition of this market (how bearish it actually may become).

Intraday data shows how hard is to pick a bottom in this market. Though late in the day, bulls came back for a while and drove the price above 3600 on the close. The futures bounced off of the 76,4% retracement of initial extended rally, which eventually drove them to reach new historical highs. Yesterday I thought, that the price was exhausted and that we already have a chance to see actual pullback or at least short term bottom, but nothing of that happened and in the wake of still growing credit concerns, the futures might find more room to decline further.

08/11/2007

Futures analysis

Expect the unexpected - this is probably the best way to describe latest market behavior, which posted another downside gap and ended up forming a hammer candle in the daily timeframe. I am starting to get more confident about what I wrote couple of days ago. What we see, is a delayed reaction on rallying commodity prices, mostly driven by crude oil, gold and silver - the best bets for inflationary times. The futures have formed a double top as historical peak and today's session apparently proved as its confirmation. I was worried about this market getting below the long term moving averages, but it seems that the selloff gained some strength, fueled by constantly rising volume and declining open interest (stop losses). Basically the daily timeframe now shows somewhat of a polarity in this market and that unfortunately fuels the whole concern about whether this situation will turn into bear market or not.

5-minute timeframe apparently shows opposite situation, at least for the short term. Today we had third in a row downside gap, which usually signals price exhaustion, meaning that the decline is over and about to reverse. The price ended up in much wider support zone, than I pointed out in my previous analysis. First of all, the 3700 level is broken, meaning more weakness in the market than I primarily expected. Of course, there was a retest of this level, but from the downside, because of the overnight gap. Considering another selloff, that is going on in America, it is too hard to judge really, where to pick a bottom in this market. Only reason supporting at least a stall (not yet a reversal) is that american index futures posted intraday double bottom patterns late in the trading session. That would be the setup for tommorrow and beyond probably, if nothing unexpected is about to happen overnight.