Iron ore bulls will have been happy with how the week was going before it wrapped. Prices were firm with an expectation that we could see another round of buying before the winter season started. This all changed 28 minutes before the closing bell, with price stalling below the CNY 850 resistance, leaving the market with a decision to make, should it hold or fold? The market decided to cash in for the week, leaving the futures down RMB 18 in the final 30 mins to close at RMB 826. This would also suggest we might not be out of this corrective phase yet.
The DCE futures look like they still have another wave higher in then, however if we look at the first few days of the month, we can see the futures retraced around 61.8% of the initial upward move. Based on the rule of alternation we should expect a technical pullback between RMB 820 and RMB 811. If we see a pullback below RMB 798 then the bulls will have to ask, is there anything left in the trend? Bullish for now, until price is telling us otherwise
The Capesize started the week with a bull close at USD 15,550, on what can only be called a weak momentum day. Unfortunately, this looks to have been the second-best performance day of the week for the December futures, which were 11.3% lower than the open on Monday at USD 13,450. The Q1 futures fared much better, having been down 8.4% from Monday’s open at one point, the futures closed the week out just 3.4% lower at USD 8,175 with the Cal 21 at USD 13,037 – 1%, suggesting this is just a prompt rebalancing in time for the thanksgiving rally (breakwaveadvisors.com). Having checked the seasonality they may be right, it may only be short lived (5 – 10 days) but there is merit in the argument that we could have an upside push coming soon, if the seasonality chart is correct.
The Panamax is having a far better time than its big sister, with our morning reports calling the futures oversold earlier in the week, which proved to be accurate. The big question with the Panamax market right now is, is the tail wagging the dog? The Physical has apparently been active, but tonnage is available, our technical does raise questions as the wave count is ambiguous, is this a base or a countertrend move? We think countertrend at this point until price tells us otherwise, if it is not countertrend then seasonality is not going to play out this year. The Dec futures closed the week at USD 9,800 + 4.25% with the Q1 closing at USD 8,300 up 1.1% and the Cal 21 at USD 9,800 + 0.9%.
The Supramax did not look convincing at the start of the week with price labouring to stay in the game until Thursday, where the bulk of the weeks move happened. The Supramax looks like there will be another move lower if the wave count is correct, suggesting that either the Panamax is going to go, with it, or the spreads will blow out soon. The Dec futures finished the week at USD 9,800 + 5.38, with 3.45% of the move on Thursday. The Q1 closed the week at USD 7,950 + 2.2% and the Cal 21 at USD 9,050 + 0.8%.
Brent had a cracking start to the week on the back of the COVID-19 vaccine, with price pushing as high as USD 45.30. Now, the naysayers will argue that it will take time for the global economy to recover, with a President elect that is likely to start dismantling Trumps fossil fuel polices as soon as he walks through the door, both of which bring genuine questions to the market.
It is apparent that oil has a potentially tough time ahead in the coming months and could end up pressing the reset button. However, the here and now is where we want to be, not the future, not the past, just in the present. Oil has jumped USD 10 in 8 days and has now entered a corrective phase, meaning we are seeing strong impulse price movement which would suggest there is still more upside in the trend, but first we m exit this corrective phase. Bring on Monday, so the bulls can have their moment of glory.
Data source FIS and Bloomberg
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