The ASX continues to enjoy a massive tailwind, with iron ore spot prices holding above $120/tonne. Prices are expected to moderate, with Brazilian exports recovering. Clyde Russell at Mining.com comments:
“Even if Brazil’s exports do remain slightly below normal, it may be the case that the iron ore forward curve is currently too optimistic. The Singapore Exchange front-month contract closed at $121.24 a tonne on Wednesday, while the six-month contract was at $100.52 and the 12-month at $89.52. This shows traders do expect prices to moderate…”
The Materials index continues to climb, with rising troughs on the Trend Index signaling buying pressure.
REITs continue their strong up-trend, in expectation of lower interest rates. The equity (dividend) yield on VAP/ASX 300 REITs has fallen to 4.3%.
Financials are testing resistance at 6450 but face headwinds from declining house prices and construction work.
The ASX 200 is headed for a test of its 2007 high at 6830, with a rising Trend index indicating buying pressure. Penetration of the rising trendline on the index chart is not likely but would warn of a correction to test support at 6000.
We continue to maintain a high level of cash in our Australian Growth portfolio.