07/11/2007

Futures analysis

I have learned one really important thing - stick to your primary opinion, especially when you are forecasting the price action. Firstly, I was saying that the futures have yet little more room to retrace, because of the moving averages catching up close to the price. Yesterday I changed my mind and wrote, that this market has found its ultimate short term support and is about to hit the highs again. So now, we have exactly what I said in the first place - retracement towards 50- and 100-day moving averages. Volume was little higher than average in the past few days and open interest declined a little bit, so definitely today we had somewhat of a selloff, or stopping out of the weak holders. On the daily chart I plotted another support zone, which I think might be tested, considering high volatility in the global markets lately. So, if the main uptrend is ought to stay intact, then we would see some bear trap spikes or candle shadows, which would indicate accumulation phase. The whole situation, that took place today was caused by China officials saying that, in the wake of weakening USD, they are considering diversification of their currency reserves. That hit the USD/JPY mostly, which corrected after declining for almost twelve hours.

Today, the futures declined sharply without even looking back until very late in the day. The price did not reach former support and found resistance even lower, which is a sign of weakness in this market. That indicates possibility of further decline, to eventually reach 3700 area, thus the last major upside gap. The double bottom, that I pointed out on monday did not hold obviously, due to this unexpected announcement from China. As always, keep an eye to close in America, because it will determine, whether the correction is over (already priced) or not (which would mean retesting of 3700). We have entered a period of great uncertainty, because the stock markets have been rallying along with commodities basically since late august (Fed decision). The dollar is constantly declining, which drives the commodity prices north, causing great inflationary pressures and threatening, that american economy will develop at a very slow rate. Now that WIG20 futures posted a global double top and then fell back down, it could imply, that the stock markets have finally reacted to such big rallies in crude oil, gold and silver. My concern now is that, if price breaches through the long term moving averages, this could mean a trend reversal and, eventually lead this market to become bearish.

06/11/2007

Futures analysis

Low range trading occurred in the futures today - no significant news, no unexpected data. Basically we can judge this, as a correction of the short term decline, which begun in the end of october. Trading activity is low, but the open interest still rises, indicating new money coming into the market. Upcoming days will show, which side does this new money support - bulls or bears - depending on the situation in the global markets. Still, the daily timeframe shows that futures have made a higher low and that of course means bias on the long side in this market, so maybe the price has already confirmed bouncing off 3780 and indicated, that we are ready to retest all-time highs again. Surely this is hard to judge, if there is not any significant event, to drive the prices either way.

Judging by the intraday data, the futures made today somewhat of a flat correction of monday's rally. There was little more movement late in the day, due to american session open and price retraced 50% of the whole two-day move, but for the most of time, it was moving sideways with rising open interest. This more detailed view allows me to be more confident about this market's return to uptrend at least in the very short term. American indexes are in the positive territory so far, after volatile start of the trading day and as long as they remain in this position, it will be a good forecast for tommorrow. The nearest upside target is probably around 3860 - prior level of support and resistance - the middle of consolidation channel.

05/11/2007

Futures analysis

The futures have retested the lower band of the support zone, that I plotted in my previous analysis. Everything is going just as I have forecasted. We have a lot of volatility going on in the markets, which is caused by rising concerns on subprime mortgage crisis, affecting financial companies' earnings reports. Today we had another CEO stepdown, this time in Citigroup, which also posted huge writedowns. The technicals are still good for this market in the mid and long term. In the short term though we have these crossing 10- and 20-day moving averages, which are currently depicting ongoing decline in the daily timeframe. My only concern about this crossover is that, the last time we saw these averages crossing near the all-time high was when the global markets collapsed, because of subprime mortgage crisis in the United States and it may repeat. Longer term view favours of course rising 50- and 100-day moving averages and that also leaves little more room for the price to decline safely, which means that the overall trend may become neutral, but not bearish yet.

In the 5-minute timeframe the market retested yet again the most important short term support zone, which I pointed out earlier in october. And such retest confirms the significance of 3780 area, which is also a 50% Fibonacci retracement of the last rally, that led to the new peaks. Today, the futures opened again with a downside gap, which is third downside window in a row, suggesting supply force exhaustion. Moreover, the confirmation ended up as an intraday double bottom and may actually indicate reversal in the short term downtrend. Such reversal may occur, if we consider that today's decline in America has already been priced. If it has not, the futures could start tommorow session with a move to the downside again. As long as the price stays above the crucial 3780, there will be little danger of damaging the main uptrend.

04/11/2007

Stock candidates' performance

No winner this week. Especially when upcoming days are going to bring further pullback to the market.

	ATLANTIS deviated from its symmetrical triangle to finally form a descending version of this pattern. Recently there has been very low trading activity, which does not yet imply that heavy selling pressure is coming. Though I would suggest to be more defensive before getting involved, because the price still could violate the lower band of this triangle - 2,20. Then we would probably see a retest of the closest support level - 1,75.
	ENERGOPOL also remained in its pattern, which in this case is a classic rectangle. The last two candles in the daily timeframe are hammer and a doji, which puts this stock practically in the same situation as above - low volume pullback and reversal candles with long downside shadows. There is yet a chance to violate 18,90, which is the lower band of the rectangle.
	MOSTALPLC posted a hammer on friday, also indicating, that it will stay inside its all-time-high-rectangle. Same as before, no upside breakout, reversal candle near the short term support, low volume pullback. This week, we had no winner, but no loser either. Basically these candidates can go either way, but for now, they have remained in sidetrends.

04/11/2007

Futures analysis

Friday's session posted an inverted hammer candle in the daily timeframe, suggesting that current pullback is slowing down, but also that it has little more room to extend and retest previous significant support levels. Another concern is the rising volume, indicating more selling pressure going on recently in the futures. On the daily chart I plotted this support zone, where I think this short term pullback is going to end. Eventually, we could see a retest of rising 50- and 100-day moving average, which are quite close to this zone, if it fails to sustain. As I was warning in some of my previous posts, there is a lot of volatility in the markets right now, caused by ongoing earnings reports season. Recently the major investment banks have been announcing huge write downs, generated by summer subprime mortgage crisis. The american indexes have made lower highs after bouncing off their corrections and now a lot of people are concerned about whether the august lows are going to be retested or not. So we are now in quite difficult situation, because the futures have made new historical highs, but simultaneously formed a potential double top pattern, which could reverse the long term trend if price falls below these two moving averages.

The intraday data shows in detail the support zone in this market (which I plotted on daily chart). Now we can see clearly, that this zone consists of two separate areas. The futures have already pulled back to the first one between 3820 and 3830 and closed there, which does not indicate downside violation yet. The second zone is somewhat 'emergency support' (3770-3780), because it is the lower band of a rectangle pattern, that market has been recently consolidating in. Breaking below this, especially on rising volume could lead to a retest of 3700 and then even 3600, depending on condition of the global markets. So in the short and mid term this market can not only enter a sidetrend, but it might fall lower, suggesting a start of a new downtrend.

31/10/2007

Futures analysis

Today was probably the last day of decline in the futures market. Price retested the rising 10-day moving average and considering what happened today in America (Fed lowered the rates by 25 basis points) we are ready to hit new highs. Tommorrow the Warsaw Stock Exchange will be closed due to the All Saints Day, so the market will have a chance to react on this news on friday. Now that the Fed has cut rates, we have one indicator that is left, which will tell us more about future direction in the markets - treasuries. This market has already started to imply inflation concerns and will be discounting it probably until the next FOMC meeting. From now on I will try to post some more information about U.S. debt market, in order to make more accurate predictions.

Today's session posted a typical inverted hammer, which indicates reversal in the trend, so that means the short term pullback has ended. Last two days developed a 45 rectangle, which exactly defined the nearest levels of resistance and support. Above 3945 there is only this historical level of resistance along with recent double top - 3960, 3970 subsequently. That means, there is rather small space to make really rapid and quick moves, unless today positive close in the U.S. will cause an overnight gap in WIG20 futures. Such gap would be third unfilled in a row, which I would definitely consider as a price exhaustion and already start to get more defensive, expecting another short term decline (hopefully finding support at the all-time high).

30/10/2007

Futures analysis

Today in the daily timeframe we saw a retest of the rising 10-day moving average, which has been constantly proving to be a solid support level in the short term. Futures market showed a little bit of correction over the last two days and that means, the price has remained safe and sound in a state of being ready to reach the uncharted territory. This two-day decline has developed on very low and yet diminishing volume. The open interest flatted a little, but there is no reason to get short, unless you trade aggressively. This is a typical pullback, which indicates strength of the bulls in a market, because of above factors. There is also possibility, that we are going to see a retest of 20-day moving average, if the decline gets more extended. I am pointing this out, because 20-day MA is lined up with the latest gap support, which for now would really be tough to break (unless Fed decides to leave the rates on current level). Also notice, that the market lately gapped up twice and did not retrace to fill them, so the next gap up in this one might be considered as a sign of price exhaustion.

Today the futures gapped down and continued a decline, that started on monday. The price ended up bouncing off the 61,8% retracement of the whole recent upward channel, that developed from a gap. Considering that american indexes are in the negative territory late in the day, tommorrow session might start from a decline, or even a downside gap. The whole situation is caused by worse-than-expected consumer confidence data, which indicated that Fed may not cut rates on wednesday. So the last day before news we have this indecision going on in the markets. To this moment, a 25bp. hike has already been priced, thus we might expect now, that anything 'worse' than this will fuel further declines in global markets.