Sentiment is turning sour for the Iron Ore futures with continued downside selling pressure. Exports from Australia have held above 18 million tons for 3 consecutive weeks, following record flows in September from Port Hedland (Bloomberg). The November futures took the worst of the hit early in the night session with price trading down to USD 113.25 (-3.24%), before recovering to close at USD 115.20 (-1.51%).
A downside rejection does give some hope to market longs who will be looking for a positive day tomorrow; However, interestingly aggregate open interest on the onshore futures started to increase on the 9-10-19, suggesting we are seeing market sellers position themselves to the short side. This needs to be watched as it could be participants putting fresh longs on after the weeklong holiday, if we keep moving lower on an expanding aggregate open interest then we have genuine bears taking the market on.
On the capsize yesterday we had seen the futures make a very small gain in price for the second day on the run, the question we asked related to volume. Markets going up on low volume are not bullish, it just means that sellers were taking a step back. The Capsize market really needed a bullish day on high volume for it to have any conviction.
Volumes were light according to a senior broker on the market leading Capesize desk. As feared, sellers, realizing they were not going to extract value on the continued weakening physical market, have been out in force today. The November futures are now trading at USD 18,425, down USD 1,475 from the previous days close, or 7.5%. With cycle completion on the Elliott wave (technical Analysis) and the index creating a deep pullback, it might be time for a reality check. Seasonality charts favour the bear, and this year is looking do different to any other average year.
Having spent so long in a range, owners will look back on the last 25 days as the good old days. The writing was on the wall at 7.30 A.M. U.K. time, when the futures went below the USD 11,575 range support after BHP confirmed Chinese coal customers have made deferment request (Reuters).
We had previously noted on the weekly technical reports that the futures had formed a symmetrical triangle within a range, where anything to the upside was to be considered as countertrend. In this instance the reports did not let us down, the break came to the downside with the futures closing on their lows at USD 10,875. Like the November Capesize futures, the Panamax were also down 7.5% on the day (USD 875), the technical suggests there is more downside to come.
We highlighted that it was going to be a hard slog for market bulls in the Supramax if the Panamax came under pressure, as expected this has been the case. The November futures have been the most resilient on the day, but with two sectors down 7.5% on the front contract it would have been too much to ask for the Supramax to buck the trend.
Sentiment has won the day with the November futures closing at USD 10,375, down 3.5% (- USD 375).
Brent futures; appears to be bullish until the technical tells us otherwise. Early signs on the European open suggested the futures could be in trouble with price failing to break the previous days high early on. However, with the IEA deciding to leave its 2020 forecast for oil demand unchanged at 91.7 million BPD (Bloomberg) the futures moved 1.5% higher, to 43.14 for the EU close.Technically bullish we remain at this point.
Bravo the IEA!