27/02/2008

Futures analysis

Today's session posted another black candle in the daily timeframe, that exceeded yesterday's close. Another session confirms failure of the pennant pattern and indicates possible next major downside move. The nearest daily price target is now 2860, as the last significant support level of 3030 was broken today. Today's session also included higher trading activity, which was caused by weak macroeconomical data, announced in the States. American economy is constantly slowing down and declining Dollar drives commodity prices upwards again (hedge against inflation).

The futures gapped up on the open as a result of a positive close of american stock market. As you can see on the intraday chart, price opened almost exactly at the lower band of the pennant formation and found resistance there. The market gained much momentum and posted a symmetrical triangle consolidation before breaking through 3025. The whole decline finished at prior resistance level from 11th of February and found support there. If there is no overnight gap, the nearest resistance area for the futures is naturally 3025-30 area, which is where you should watch for reversal bars or patterns, when planning a short position entry here. If 2990 is broken, then the next level of support will be 2950.

26/02/2008

Futures analysis

The pennant pattern was violated to the downside, as price got past its lower band. Volume has reached the highest value since the last eight trading sessions, so we might have a confirmation here already. The declining 50-day moving average is now below 3200 and that may indicate further weakening of the futures market. If the actual daily support is broken (3030), then the nearest downside price target appears to be 2860, which is the last swing low. The pennant pattern no longer works as a symmetrical triangle, in the wake of its lower band violation, but on the other hand, if 3030 level is defended and the market decides to extend current uptrend, then we will probably see a descending triangle pattern, which in that case would be the best bet. To summarize, we have downtrend in the short term and long term direction of the futures is still under a question mark.

The american indexes managed to recover yesterday, which resulted in an upside gap today in WIG20 futures. As you can see, the whole morning action ended up finding short term resistance near 3130 and trend shifted from there posting a wide ranging 115-point candle. Today's macroeconomical news in the U.S. showed rising inflation and dropping consumer confidence, but at the time of writing, the american stock market reacted contrary to that, posting already a half percent gain. In the wake of such bullish price action and WIG20 futures becoming very oversold in the short term, tommorrow session will probably decide, whether prior support levels are going to become resistance (3045 and 3070).

25/02/2008

Futures analysis

The pennant pattern continues to contract under 3195 long term resistance. In relation to friday's close, the futures showed little 0.1% change to the upside, though they were declining throughout most of the trading session. Also, today there was not any significant news, that could change the bigger picture here in daily timeframe. We still have to wait for a confirmation - either upside violation of 3195 or breaking through lower band of the pennant formation. The volume has been constantly diminishing while development of this symmetrical trianle took place, which is a typical correction-before-next-swing pattern as the market gains strength.

Intraday chart shows, that previously mentioned 3045 support was touched and defended today. In my last analysis I stated, that if this point is retested, then it will be the first sign of the symmetrical triangle pattern violation. The close proved, that violation of the lower triangle band was just a bear trap, which eventually widened this whole price pattern. American index futures are little changed at the time of writing, but they have erased all of the morning gains as selling pressure returns. Tommorrow's news includes PPI and consumer confidence index, usually causing intraday volatility. Be careful when entering the market even in the short term, as we are close to important psychological level here in WIG20 futures, making it hard to place a reasonable stop-loss.

23/02/2008

Futures analysis

Back with another analysis after a short break. Throughout the last three sessions, the futures have confirmed formation of a price pattern, which is commonly known as pennant. When this occurs, it usually indicates continuation of previous swing (upswing in this case). Moreover, it has formed just under a major resistance area around 3195, which corresponds with last year's January and March lows. Also, the declining 50-day moving average is now below the August low and with 3195 level it forms heavy resistance for the futures to break through. The market has been showing strength so far, but we still need a confirmation, whether current pullback is going to be extended or not. As you can see on the daily chart, the last candle is an inverted hammer, which suggests that more selling pressure came into the market late during friday's session. At first, it would indicate a downside breakthrough of the pennant pattern, but not if we take into account american session, that always acts as a psychological catalyst, causing overnight action in the global markets. S&P and DJ erased all the morning losses and went back to close nearly 1% in the positive territory. What I expect here is that the WIG20 futures will probably stay inside the pennant for little longer, before breaking through to either side.

5-minute timeframe shows, that although the last three sessions held price inside the pennant, the whole action did not take place without significant increase in short term volatility. Basically, we had three sessions and three gaps to either side. All of these are filled, but as you can see from the chart, the futures did not trend much during the last three days. If we take only friday into account, selling took over late in the day, as I pointed out earlier, but the close remained above lower band of the pennant. As the futures are constantly contracting inside pennant's range, potential pattern breakthrough levels are the last two swing points plotted on the intraday chart: 3160 resistance and 3045 support. These two levels are in such alignment, that touching them will equal beginning of potential pennant violation (their position exceeds contracting triangle bands, as shown on the chart). As to make a final forecast, daily candle alignment still works for uptrend continuation (bullish stance, but unconfirmed), unless the futures fail to break the 3195 resistance or violate current pennant pattern to the downside.

19/02/2008

Futures analysis

The futures remain in short term uptrend, but in the last two days, there has not been much of an extension of ongoing pullback. Price stopped at previous support level (established in the beginning of 2007), which has become resistance - 3165. The 50-day moving average has passed through the August low level and will be acting as somewhat 'dynamic' trendline resistance in the upcoming days. Nonetheless, with such significantly lower volatility than before, the futures might stay inside resistance zone between 3165 and 3265 for a longer period of time (becoming range-bound). Though, the first most important point will be mentioned 50-day MA, so we will have to wait until its tested, to form possible scenarios.

The market did not manage to break through the main resistance, which is 3170 despite today's double test. The close ended up at 3130, finding support at previous resistance, but price action, that took place late in the day suggests another possibility of current short term uptrend reversal. As american indexes erased whole gains from the morning (Dow Jones formed a grave stone doji in the daily timeframe), forecast for tommorrow's open would be neutral/bearish. In case of more action to the downside, the nearest support level appears to be the last swing low near 3095. If that is broken, then I expect the futures to fall to 3060 or 3025 (low from where the last upside gap occurred), depending on the momentum. Tommorrow, there will also be announcements, which cover CPI and housing market data, which may cause sharp spikes or mentioned momentum (depends on market's opinion on this news).

15/02/2008

Futures analysis

The futures dropped again today as yesterday's declines in U.S. stock markets forced a global retreat. If we look at the daily chart first, the price found and confirmed resistance at 38,2% Fibonacci retracement of the whole downtrend. This indicates weakness as the market does not even manage to pull back to the declining 50-day moving average. Though, as long as the price remains above 3000 area, short term uptrend will not shift to the downside again (moving averages also provide support). Macroeconomical data is still going against the bulls, as today consumer confidence level dropped to 16-year low along with industrial production (0.1%).

Today's session opened with just a little downside gap (no more than 10 points) and did not exceed 3090 level as I expected. Next, the futures posted a bull trap at 3125 and began to fall down from there, breaking through 3090 and reaching back 3025 support, which is just 5 points away from my yesterday's forecast. If this area is broken, the next downside target would probably be 2985. I expected this to be more intermediate term target (as for intraday traders), but it appears, that in the wake of declining global markets, this level might be tested just in the beginning of the next week. Upcoming announcements start from wednesday and will cover CPI along with housing starts and building permits, to further gauge recession probability.

14/02/2008

Futures analysis

The last two trading sessions did not clarify, where are the futures are going to go from the March low level of 3125. Wednesday began from a gap down, but eventually buyers managed to take control and drove the price up to this pivotal point. Because of yesterday's gains in U.S. stock market, the futures posted today an upside gap above 3125, but for the most of the day, the trend was down and we are back at the starting point. The bulls are struggling to extend current pullback further to the upside, but in the wake of recent events (more growth concerns in America) this will take more time (if any). The August low is now corresponding with the declining 50-day moving average, so if the price stays in rather flat corrective pattern, then reaching 3265 might not occur whatsoever. Good thing for the bulls is that short term volatility stepped off again, 10- and 20-day moving averages have recently made a crossover, so there is definitely some room before the short term trend shifts again to the downside (at least above 3000 area).

As wednesday brought just a flat corrective pattern, that did not change the short term trend, today we had a downside violation of the rising trendline (plotted on the chart), that has been established over the last four days. The price found resistance at previous support level of 3190 and retraced from there to 3090-3125 area (both, upper and lower band are also prior support and resistance levels). As the short term uptrend switched to neutral, today's decline of american stock indexes puts further upside action in question. S&P declined over 1% and NASDAQ almost 2%. Depending yet on asian close, there might be an overnight gap to the downside tommorrow in WIG20 futures. If the price breaks down through 3090, then expect it to fall firstly to 3030 and if that level fails to hold, then to 2985, but that is longer term target.