Iron ore flows are strong, suggesting we are looking at an upside countertrend move, unless we see more construction projects announced in China or a stimulus deal agreed in the U.S.
We noted that after the last podium performance with Trump and Biden this seemed unlikely. Today Nancy Pelosi announced she was hopeful of an agreement this week (Bloomberg). This has hurt a little!
As noted on the 19th, the futures had closed above the previous open keeping momentum intact but needed to close above the CNY 804 level if they were to see any follow through. This level has been breached on the intraday, now we need to see if momentum is strong enough to close above it. Early signals will possibly come from a sentiment push in the U.S. equities. If these move higher, then the Asian iron ore session could be bullish.
We had seen the signs that Capesize FFAs were about to turn a few days back with a positive performance yesterday and a flat index today, resulting in further upside momentum. The November contract is now at USD 18,875 (+9.1%) and has triggered the intraday buy signals on the morning report two days ago. The November futures are now looking to close on their highs.
This upside move is currently against the trend, but historically when Capesize futures produce a bullish gap and close on their highs, there is often follow through the next day. It is important to note that this is not guaranteed.
The Panamax index continues to slow down, coming in at -150 (USD 9,973) today. The futures continue to rally into the bear index with the November contract putting in a 2.1% gain (USD 10,900), Q4 + 1.3% (USD 10,837) and the Cal 21 up .6% at USD 10,037.
With the November futures at +1,000 to the index, which is heading lower, something has got to give. Futures momentum has a time element on its side but cannot maintain bullish momentum for much longer without physical support.
Having flatlined for days, Supramax produced a positive return of +0.6 % on the Cal 21 yesterday and that created a little bit of excitement. Not because the whole world was about to go super bullish but because this was the first signal before the Capesize frontend started to rally.
OK, we might not have mirrored the Capes, but we are up 1.5% on the November futures, to USD 10,425 (Q4 10,375 +0.9%, Cal 21 9162 + 0.4%). Too early to tell if it will continue as it is now within USD 200 of the index, suggesting the market is unlikely to go on a rampant run anytime soon.
OPEC needs to start talking if it wants to keep prices buoyant as the futures are now looking a little vulnerable, down USD 1.19 (2.94%). Positive rhetoric is not going to be enough to save the black gold and scheduled talks are a thing of the past. If oil is to remain bullish it will need intervention at this point: the market is sensing weakness, the futures have failed to move higher on positive OPEC rhetoric and that is ultimately bearish.
Have a nice evening