Ned/ACE
I have posted my updated IO chart below. The blue path shows what I expected to happen, the red path was the pessimistic case and the green path was the optimistic case. Although, in my last post I said that I thought the green path was now becoming more likely due to the momentum of the bounce off the 100 day moving average. It was good to see a little consolidation around and just below the expected resistance level at $200 (marked by the purple dotted line), before punching through - as rapid rises without periods of consolidation are generally not sustainable. Now that we have broken through the $200 level it is likely that we will continue up before we top out somewhere between $222 and $230. This level will represent the new resistance until we break out of the light blue ascending triangle somewhere from late July to mid August. The green path shows the price topping out at $222 as I thought the ATH on the 12th of May above $230 was probably an over extension (that doesn't represent the true resistance level).
Basically the IO price is currently tracking perfectly in a very bullish but sustainable pattern. I know people say that these prices are unstainable but the technicals are showing no sign of slowing (at the moment) which means a breakout to new highs with projected targets of $262 to $287, is more likely than not at this stage. Again, keep in mind that this chart is the 62% FE Fines Futures - Next Contract in Front, which is July. The current futures contract is June which usually $6 ahead and spot is a further $3 ahead of the June contract. So you can add $9-10 to prices discussed above and in the chart below to get current spot price equivalent. This means that a target of $287 for the "next in front futures contract" is getting pretty close to the equivalent of a $300 spot price. Base on this it is entirely possible that we will see the spot price hitting something close to $300 by early to mid September (using the 80-100 trading days between previous peaks as a guide for timing the future peaks).
As for FEX, again the blue path was what I thought was more likely with the green path being the optimistic case. However, this was predicated on the blue and green paths for IO above. As you can see while we are following the more optimistic path green for IO (chart above), FEX is following the less optimistic blue path. As many have stated in the posts above, FEX is decoupling slightly from the IO but not in the direction that we want.
Here is the chart that shows the comparison between FEX (the candles) and the IO price (aqua line). You can see that the IO price has moved noticeably higher from the 8th of June (highlighted by the blue circle). I'm not sure what has caused this recent change in pricing behaviour. Some people have suggested it could be caused by end of year selling. Also, perhaps the algorithms are in some form of distribution mode which means they only sell when FEX increases beyond the movements in the IO price but don't necessarily accumulate when FEX falls below (unless it falls substantially below???). So in the past we have retailers pushing the price up and the algos pushing the price down with reference to the IO price. If the retailers accumulating have started to dry up and have in fact started to become net sellers (due to EOFY), with the algos/bots standing on the sidelines (i.e. they are not selling but they are not buying either), perhaps this would explain this pricing behaviour.
What ever the reason, it just puts us in a situation where FEX is more de-risked and better priced than ever, in an environment where IO is breaking records and showing no sign of any real weakness from both a technical and fundamental standpoint. This is an excellent time to be accumulating FEX.
Lastly, I'm sorry to those that don't like these comparisons and are frustrated by the current SP movements - we are all in the same boat. As they say, it is what it is... until it isn't. I'm now hoping for ACE (and others) that it stays like this for a little while longer as it doesn't bother me (too much) what happens over the next couple of weeks - given I know what going to happen from the middle of next month (possibly sooner). It will be interesting to see how early the run on the SP starts before the next quarterly. An early start would be indicative of a market that is more in-tune with the value of FEX than what the SP would suggest (last time it started 6 trading days prior).
ALL IMO DYOR.
(20min delay)