Thinking iron ore miners? Think dot bomb stocks

My old stable mate, Greg McKenna continues to get excited by a blip on his iron ore chart. From BI today:

We’ve been watching it for a while now but iron ore finally broke through the $97 tonne level on Friday night for a very strong weekly close.

It’s the fourth week in a row that iron ore has finished higher after a strong bounce from the $86.67 low a month back.

Closing Friday night at $97.17, 62% Fe futures for September delivery are now $8.5 tonne higher (9.59%) than the recent low.

Earlier this month we highlighted that both Fortescue Metals CFO Stephen Pearce and analysts at Citigroup were bullish on the price of ore and this break, which is in effect a reverse head and shoulder break, is targeting the $102 region. Traders of iron ore and iron ore miners like Fortescue, Arrium, Atlas and BC Iron will also be excited.

$102 is not going to excite anyone and the fundamentals are questioning whether we’ll even get there. Indeed, miners are down again today following their recent falling trend because this bounce has failed to be material in the scheme of things. Dalian for iron ore futures and rebar futures are up firmly in China at the open so they might claw back some losses this afternoon.

Here are the relative performance charts:

The best way to think about iron ore stocks is the dot bomb in which tech stocks just kept falling. There’ll be ebbs and flows, short squeezes and rallies, and the majors will fare better than juniors but will still be swimming against a terrible tide of negative sentiment for years to come.