12/01/2008

Futures analysis

Thursday trading session proved me wrong and led to retest the lower band of support zone between 3260 and 3315, exceeding the wednesday low, which I thought was indicating a reversal (strong buying late in the day). On thursday, we had a large volume selloff, which finally caused a retest of the August lows. Friday session led to even more downside action, that resulted in posting one more lower low, but eventually the bulls came back and managed to retrace some of the primary move (explained later in the intraday section of this post). In the daily timeframe, friday session posted a Doji candle with fourth in a row downside spike, proving that the support area held as it was meant to do. Such situation could mean perfect time for a short term pullback, because recently, traders started betting for the Fed to radically cut the rates, in order to prevent recession, but increasing inflation. Radical cut means, that Fed funds rate may reach 3,75% or even 3,50% as indicated by the Cleveland Fed survey.

5-minute timeframe shows, that the price deviated from the channel, that I plotted some time ago. As it can be seen on the intraday chart, the futures violated lower band of the channel, then quickly returned and found support at it again, moving mostly sideways until the end of the day. In the wake of upcoming events and indications provided by daily timeframe, this friday action may now be considered as a bear trap, which could be a starting point of a trend reversal pattern. On the other hand, friday session in America closed over 1% in the negative territory, which could fuel more panicky selling on monday, or even an overnight downside gap. So, if we do not see price moving at least sideways, this whole reversal setup would be for nothing, regardless of the Fed anticipation. No doubt, there is going to be a lot of volatility in the global markets again.

09/01/2008

Futures analysis

Yesterday I was expecting, that the slowing futures will pull back more, before finally retesting and breaking through the December lows, but american indexes fell late in the day and caused declines of the global markets. Today's open in America was rather good, so as a result of this, we have another hammer candle in the daily timeframe, though ranging more widely in relation to previous two hammers. The price touched upper band of support zone, which I pointed out yesterday, in my analysis, but came back late in the day, eventually closing in the range of December lows. States are moving mostly sideways at the time of writing, but with more selling pressure now, so that does not imply any reversal yet, here in WIG20 futures. Though a retesting of important levels always means that the crowd is shifting through emotional states, causing volatile price action, which happened today. But until this support zone remains unconfirmed, there is still possibility to move in both ways.

As for the 5-minute timeframe, the price still moves in a declining channel, touching only its lower band, which either means more selling pressure coming into the market or even price exhaustion, creating a possibility to finally establish a bottom. As I often say in my posts, my view comes primarily from the price action, then the catalysts (reaction to news), so my bet is still for reversal/short term bottom and will remain such, until the price stops posting downside spikes. This may continue or change tommorrow, because of important news covering data from the U.S. labour market and also crude inventories, which will determine inflationary pressures and condition of american economy.

08/01/2008

Futures analysis

The futures are still slowing down, which resulted in posting a hammer candle in daily timeframe. Today's volume was the biggest since the last nine trading sessions, which may indicate that bottoming process is taking place. Technicals are indicating one thing, but this time, potential catalysts (mostly news) are showing different situation, which makes it hard to judge, where the market is going to move. However, price is the only thing that pays, so if there are no overnight, unexpected gaps, my bet would still remain for more sideway action in the upcoming days. The States are also moving sideways at the time of writing, although there was some speculation on bankrupcy of the lending institutions.

Looking at the intraday data, today's action shows exactly, what I expected yesterday. Sideway action (channel inside the channel) slowed down declining futures, which eventually posted a pullback, reaching 3420 as suggested resistance area. The upper band of the inside channel became support late in the day, followed by a huge downside spike, which was the result of America's open. 3420 remains as the short term resistance along with the declining upper band of the main channel, increasing the significance of eventual retest (whether it is going to be a turning point or not). Macroeconomical data in the U.S. (Pending Home Sales) showed even more slump in the real estate market, spurring concerns again about recession, which is to spread on the global markets.

07/01/2008

Futures analysis

Only 40 points left before retesting December and 110 to August lows. Today's session posted an inverted hammer, which is a sign that the hard selloff may be slowing down and indeed this is a typical situation when markets come to important psychological levels. This may also imply, that before breaking down below the lows will be preceeded by posting another lower high by the price, increasing the strength of eventual breakdown (extended rallies or declines often fail to break important levels at the first 'try'). The nearest support after December lows is of course 3265, which is the low established after 'Fed move' (the rate cut) in the late August. If that fails (confirming the double top pattern), then there is another support zone, which may be the first downside price target, as for the short term. Nonetheless, price action below 3265 would confirm, that we have entered a bear market.

5-minute timeframe shows, that today's price action was mostly sideways, indicating that the declining market may be slowing down. What it appears to be now, is that we have a channel inside a channel. Today's channel has little less downslope and it has developed near the lower band of the main declining channel. Sideway action near important levels of support or resistance definitely suggests a slowdown (but not yet a reversal), so there is still a chance to see a pullback, creating opportunity to get into the downtrend before the market finally breaks down. The nearest eventual upside target appears to be prior support of 3420, which was tested a couple of times before, confirming its short term significance. Unless the market gaps up tommorrow, this appears to be the closest entry point for the selling force, then comes the declining upper band of main channel.

05/01/2008

Futures analysis

Friday's session confirmed the resistance area, that I pointed out in my previous analysis. This zone lies between prior level of support 3460 and its upper band is 23,6% Fibonacci retracement of the whole latest decline. It was quite volatile day, because of major catalysts, that influenced the global markets. Yesterday's news covered Nonfarm Payrolls, which appeared to be a lot worse than expected (causing recession speculation again) and also, remaining data from the labour market in America (Unemployment Rate also exceeded expectations). Now, that the futures firstly posted a lower high on 27th of December, then confirmed previously mentioned resistance area, retest of December lows appears to be inevitable in upcoming week. 50-day moving average crossed below the 100-day MA on friday, which is a result of poor condition of american economy, that is going to spread all over the global markets. Breaking below the plotted (yet) rising trendline will only leave us the august spike to retest, before confirming the bear market here.

Intraday data shows, that the price is recently declining in a channel, though - as it can be seen on the chart - not perfectly. If you look at the previous analysis, the upper band of this channel is now adjusted in relation to prior position. This is, because the futures acted just as I expected, violating previous upper line and finding resistance at 3495. After confirming this level, the price started to decline a little, but until the news announcement, action was mostly sideways. Eventually, WIG20 futures closed below previous level of support, which is 3420 and will probably move more to the downside, because of highly negative close in the United States. Just 60 points are left to retest the lows established on 18th and 19th of December. How fast the retest will occur is going to depend on accuracy of the channel, that I plotted (especially its lower band).

03/01/2008

Futures analysis

Today's session opened with a 14-point downside gap and closed just 0,35% above yesterday's gravestone doji's low, showing signs of weak recovery after three consecutive days of declining. The price still remains below 23,6% Fibonacci retracement of the whole 3-month downtrend and has entered a short term resistance area, which will prove to be crucial probably tommorrow already. Confirming this area will mean faster retest of the December lows, but staying above it may produce a short term reversal pattern. Such action will definitely slow the upcoming retest, but I do not think, that it would be capable of ending the whole downtrend, in the wake of recent macroeconomical concerns. My focus is on whether December lows are going to hold as a support or not. If that happens, the double top pattern (July and October) will be confirmed.

5-minute timeframe shows, that today's action was mostly sideways, with no spectacular reactions even on the news. The nearest resistance lies probably near the declining trendline, but this will depend on the overnight action, that could drive the price more to the upside, eventually finding resistance near 3490 (plotted on the chart). But as you can see, this is still a projection of potential price action. A 5-wave decline found its end today at 3420 support and the market has still a chance for reaching more to the upside. As I am writing this, the Dow futures climbed only 0,26%, so the odds, that there will be an upside gap on tommorrow's open are reduced. Couple of news coming up also, including the most volatility-causing Nonfarm Payrolls and the rest from the labour market.

02/01/2008

Futures analysis

Happy New Year everybody, we are back from the holidays and ready to hit the markets again. But the beginning of 2008 brings us some bad news, driving global stock markets lower and lower again. Crude oil hit 100$ a barrell today, gold hit 860$, soybeans and wheat climbed more than 3%, which indicates, that major players are hedging against inflationary pressures in America. Moreover, Fed is expected to lower rates again, which is to prevent recession, but as we know, increasing money supply will spur more inflationary concerns. As you can see on the daily chart, today's candle looks like some sort of a downside doji cross, which indicates much selling pressure in the futures (explained later, in intraday section of this post). After posting a shooting star near the declining 20-day moving average, the market continues to decline second day in a row and will probably retest 18/19th December lows.

Lot of volatility going on in the market today, which was the result of today's action in commodities. On the open, the futures reacted to a selloff, that took place on 28th of December. Price pulled back, reached 50% Fibonacci retracement of the recent downside move and eventually posted a bull trap barely touching previous support/resistance level of 3532 (marked on the chart). Then, the sellers came in and drove the price back to its open, posting a huge 40-point gap on the close. Tommorrow's action depends now on the close in the United States. Dow Jones futures are declining almost 2% now, two and a half hours before the close. Also, some news coming up late in the day - Initial Claims and Factory Orders, which are to determine condition of american economy.