The ore price fell again yesterday:
And as the chart shows, we are now well clear of the neckline on the head shoulder break, which now looks like upside resistance:
For those that don’t think that this pattern is text book then this week’s RBA chart pack may convince:
Notice the left hand chart with the pre-2008 divergence of average export prices to spot, whereas now they are one and the same. This was because our major extractors of iron ore went from quarterly contracts to spot – and now that is coming back and biting them on the arse (yes, that’s an official financial term). We appear to have completely retraced the 2010 boom. Furthermore, check out the almost perfect blue head and shoulders pattern. The charts are signalling much more downside. I’m not so sure, my target for this down move was $1.10. Mind you, it may overshoot first.
It’s not all bad news of course. The volumes charts from the RBA is encouraging:
The big falls in thermal coal have definitely halted:
And they’ve put in a nice bullish double bottom to boot.
But it’s not enough. We’re already looking at material falls in the trade balance in July and October. Not to mention the ever disappearing surplus. I better go buy some Aussie dollars!
