I normally start my notes each day with a summary of Wall Street – well this morning I am starting with iron ore. I have been mentioning for the last three months how the iron ore price was just hanging in – well last night it didn’t. I know it only fell a dollar but that is about the most important dollar going around at the moment. I am prepared to give it a couple of days but unless this market rallies and retrieves the bottom of the triangle that has enclosed all trading for the past year, then it is in serious trouble and we all know just how important this market is to a number of our majors as well as our economy. I hate to think what might happen to Australia’s debt if this break is confirmed. Only yesterday we committed ourselves to spending a few more billon – but then what is a billion other than just a few more noughts. Been a bit worried that BHP and RIO have been savaged over the past few days so it would appear that there has been more than me concerned. I even mentioned last week that I felt the whole business over AGO was concerns about the outlook for the iron ore price. So here we are now – my worst nightmare if this market does not rally.
And just to complicate matters, I am going to be away from my office till Friday of next week so won’t be updating the iron ore outlook each day. I am off to Melbourne to welcome a new grandson.
However, Wall Street came back from holiday in a much more positive mood and finished nicely higher. SPX is still caught in the tight band that has restricted trading recently but I have a time line coming through around the end of next week – be good if the market could rally into that period.
Of the nine sectors of their market only XLE (energy) was down but the smallest rise amongst the rest of them was XLF (finance). We need to be a bit vigilant when their banks are not really participating.
Looking past iron ore, other commodities were mixed. Crude off a bit. I mentioned earlier in the week that the weakness of the natural gas market might start to weigh on crude and that looks to be happening. Copper is the one that has been really savaged in the past few days and this continued overnight and weighed on the other base metals as well. Precious metals a bit better. Need a bit more action here to confirm that we are set for higher levels.
I have carried on a bit over recent months when I keep hearing what a poor performance the Australian market has been in relation to say Wall Street. OK we don’t have some big tech names like they do (FANGS) but what we do have is a small number of really large capitalisation stocks that have been such laggards. Go past only half a dozen of these majors and the Australian performance is as good as anywhere. Over the past couple of weeks, money has obviously finally seen a bit of value in the banks and even ….drum roll ….Telstra, which as I mentioned last week has picked up a return line on my long term chart. This buying in these leaders has definitely had a very positive effect on the index but in particular the 20 Leaders (XTL). So if things can just hold together in the US, we may finally see our index overcome the problems it has had for months. My only concern is how late in the cycle it is before we got to this stage.
XJO hourly has been caught in a very tight little triangle for the past eleven trading days while at the same time picking up an important line from the low at the beginning of April. Also being restricted on the topside by a really important line from the mid May high. If it can break free of this line, we should at least see a bit of short term exuberance. But if iron ore and copper don’t rally then any joy will be cut short.
I felt yesterday that we were seeing a few little spec stocks poke their nose above some of the really devastating downtrends formed over the past few months. Now whether they will be able to get on with the job, I do not know but at least it is a step in the right direction. Need volume for any of these stocks to move. Then of course, the problem is …. trying to pick the best of them. Good luck with that.
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