Iron ore futures continue to trade at new highs signaling the market trend remains bullish. Demand remains resilient whilst we are seeing a decline in steel inventories by 178,400 tons (MySteel), this is following the strong industrial and property data from yesterday.
The fundamental continues to support the market with futures trading up to a high of USD 124.06, before closing at USD 123.50. However, there are signs of exhaustion creeping into the trend on the technical side. To find out more please read our most recent technical ‘Iron Ore Dec 20 (Rolling Front Month)’ https://freightinvestorservices.com/blog/iron-ore-dec-20-rolling-front-month-2/
A better day for the capsize market which is seeing a momentum slowdown. The market keeps testing the lows but failing to hold. Yesterday’s move lower found positive divergences on most of the intraday RSI indicators, resulting in buying support. The physical might not be showing any real signs of life, but to be fair, the Panamax started with a momentum slowdown that forced charters to start covering in the physical market. Even if upside moves are expected to be short lived due to the seasonality, the signs are there that we could see some form of upside move in the futures soon. The Dec futures closed at USD 12,900 +4.2% with the Q1 at USD 7,950 + 1.9% and the Cal 21 at USD 12,925 + 1.2%. for more information on the technical side of the market please follow this link Capesize Technical Report https://fisapp.com/wp-content/uploads/2020/11/FIS-4-PAGE-TECHNICAL-REPORT-CAPESIZE-18-11-20.pdf
The Panamax futures started the day bid with the December trading up to a high of USD 10,700 on the open. Price held near the highs for morning session with expectations that the index would come in at pus 400 or more. However, a bit of profit taking seemed to spook the market before the index, which itself disappointed coming in at + 358, leading to a weak afternoon session. The December futures finished the day down at USD 10,375 – 0.7%, with the Q1 getting sold into the close to finish the day at USD 8,350, – 1.2%. Finally, the more resilient Cal 21 finished the session at USD 9,862, – 0.8%. Market buyers will want to see the futures close the 8.00 a.m. (GMT) session above USD 10,483, if it does not you might see a further bout of longs exiting the market.
Unlike the Panamax the Supramax held onto most of its gains, with the December futures closing at USD 10,075 + 1.8%. Price gapped up on the open before selling off from the USD 10,162.50 high, on good volume. The futures remained well supported into the close; however, if we see a weak open on the Panamax then expect a price pullback, as the intraday RSI is at 70 with major resistance between the 73 – 75 area. Bullish, but we are looking a little overextended based on the RSI. Further down the curve the Q1 21 closed at USD 8,150 + 1.9%, and the Cal 21 closed at USD 9,150 +0.5%.
The top Bloomberg headline is ‘oil is clinging to rally on signs of coronavirus vaccine progress’. Oil is doing no more than following its technical footprint at the moment. The Elliott wave cycle is bullish on the intraday and the headlines are following the market. Oil is pushing on the back of the initial vaccine story and will eventually run its course. Right now, Brent is targeting the USD 45.30 high, and could potentially go as high as USD 48.61based on Elliott wave projections. Above USD 45.30 it will have fulfilled its minimum cycle requirement but unless it faces proper resistance the bulls can see their upside target and will let the headlines follow them until something real actually happens to counter the move.
Elsewhere in the world, U.S. small caps edge higher and it looks like bitcoin is suffering a bit of market whaling, as 2% of the anonymous accounts control 95% of the market (Bloomberg). We at FIS would suggest that if you want bitcoin volatility with no whaling, you should look at the Capesize futures. Established, regulated and transparent!
Quant funds are also suffering in equity markets with trading rules being broken as retail investors jump in and out of the market. Should they be looking for diversification then we would again point to the Freight market. Strong volatility and big trends are what a trader wants to see making freight Futures potentially the next big thing for the Quant sector. More on this to follow.
Have a nice evening
Data source FIS and Bloomberg
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