XSO (ASX) The Brains Trust

Originally posted by paddington bear ↑

The train picked up speed again overnight as traders kept their eye on the nice round figure of 20,000. Almost too much for them to resist! However, all the key indices are still caught in a little sideways pattern. If they break topside then we will certainly have the last of those long term bears finally throwing in the towel.

I calculate an Advance/Decline line each day using the value of money going into rising and falling stocks. This line has been dragging the market higher for weeks and last night achieved another new high.

There were some interesting things happening across the commodity markets. Gold is consolidating around this first resistance zone. I thought it would have come off more here but palladium seems to be in such a hurry that it is dragging all the metals with it. However, I do think things might be getting a wee bit overdone in palladium after such a huge move over the past week. And then there have been fabulous moves in things like wheat and cotton. Of course the US dollar being weaker is helping. I mentioned last week that I thought the US dollar looked to be forming a top. This is still the governing factor. We really need to watch the US dollar chart as if it breaks topside then the commodities will obviously suffer, but if it continues to weaken, they will be the main beneficiary. As I keep saying, it is all about currencies.

Crude is still being governed by the natural gas market and until I can get that chart to break out, crude is going to have a road block ahead. So despite the fact that everyone liked the chart of crude, it has once more failed to continue its rally because of the weakness in natural gas.

I mentioned yesterday that the weakness in the iron ore price out into the futures was making me uneasy. There is now a spread of $20 one year out. Is the market factoring in that difference? Thirty dollars for two years out.....

I felt yesterday that there was some money coming back into the spec end of our market. Perhaps it was just the stocks I follow that had some buying. Also liked the look of some of the lithium babies. Not confirmed but there are some nice patterns around in a lot of the little stocks. And cobalt of course which is getting a bit of publicity at the moment. A better speculative element in the US as well with URA (uranium) and LIT (lithium) ETF’s all heading higher.

On another matter – we talk a lot in Australia about overseas money behind our property market boom – the lead article on the BBC Business Report this morning was an item about the Chinese officials cracking down on the movement of money out of China. Now require an “Official Declaration” (whatever that will be worth) from anyone wanting to take money out of the country. May or may not eventually have an affect here but something to keep and eye on.

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re dalian iron ore futures ...

the backwardation of the contract months is bullish for iron ore prices in the near term.

re gold futures on globex ...

there is a significant contango as you go further out in the contract months. that suggests lower gold prices.