Strong PMI figures in China have not filtered through to the DCE iron ore with price remaining below the RMB 806 level. A positive night session has seen the futures move RMB 8 higher, USD 1.18 for the Nov futures (+1.1%). Potentially this is nothing more than day traders positioning themselves for a potential change of the guard in the White House. Technically the intraday is not really giving much away as the we enter the fourth day of sideways action. Big day tomorrow with U.S election results filtering in state by state, meaning we could see some intraday volatility whipping the market.
The Capesize market remains under pressure with the December futures down a further 3.4% at USD 14,150. This season does not suit the big ladies and this year has pulled no surprises so far, our morning report on the 23-10-20 highlighted the potential for a weak open below USD 19,666 with price now about USD 4,000 lower. Further down the curve the Q1 21 is down 1% (USD 7,750) with the Cal 21 down 1.1% at USD 12,925
Do we go lower from here?
We are down USD 500 but the candle itself is small, warning of a momentum slowdown based on price. If the futures open above the USD 14,233 level, we just might see a respite from the constant selling. Just an observation but since the 25-8-20 we have seen two moves down that have lasted 10 days, this is day 9 of this correction. Would you bet against a bounce?
The Panamax has had a hard time of late with the technical spotting the market weakness just before the recent wave of selling. Although there is no good news on the horizon in the physical, the paper is starting to look overextended to the downside ( for a full technical briefing FIS Panamax Technical Report https://fisapp.com/wp-content/uploads/2020/11/FIS-4-PAGE-TECHNICAL-REPORT-PANAMAX-3-11-20.pdf).
Upside moves may potentially be countertrend, but the paper is the lead indicator and could potentially create a flurry of activity in the physical market in the coming days. We can see already that the Dec futures were down only -0.3% at USD 9,275; However, the real story is the Q1 futures which are up 2%, to USD 7,825, supporting are argument for some short covering.
The Q1 cape v’s Panamax spread is one to watch as it is trading around par, between 2015 – 2019 that spread has a 5-year average settlement at USD 1,273. Today 2016 – 2020 futures average is USD 1,771. Keep an eye on the big players here as they will be the quietly looking to extract value on this, then sit back and wait for an upside push.
Supramax is the only front-end futures to produce a positive day closing + 1.1% at USD 9,150. It might not be much, but it begs the question, anomaly, or lead indicator? Based on what we can see this looks to be the short covering lead. Further down the curve the Q1 futures closes -0.3% at USD 7,500 and the Cal 21 +0.4% at USD 8,800
Brent futures had a good day yesterday and that has followed through today with the prices now 1.7% higher. With Russia and the Saudi’s looking to delay supply hikes in January (Bloomberg) the market is gaining in confidence. The trend might still be bearish, but if this rhetoric keeps up shorts will be squeezed. Intraday price is slowing down for now as we close for the day but keep an eye on this night session as a swinging dollar will have nock on effects.
Have a nice evening