From David Llewellyn-Smith:
…..restocking is the only thing going on here, enhanced by recent Chinese stimulus. It will pass in due course leaving enormous oversupply and far too large Chinese inventories.
….Not only is iron ore going below $30, it’s going below $20 soon enough. This year we’ll see more supply from Minas Rio, Sino, Roy Hill, India and Vale as Chinese demand falls sharply with a swing in the market of 100mt towards greater surplus.
I have seen a few advisers recommending BHP to clients but there are no signs that the commodity free-fall is ending.
Bullish divergence on 13-week Twiggs Money Flow reflects medium-term buying pressure. Expect strong resistance at 16.50. Breach of short-term support at 14.00 remains likely and would signal another decline.
The weight of the market is on the sell-side and a knife-edge reversal is most unlikely.
A surge in production from miner BHP Billiton — shipping 223 million tonnes in FY 2014 against earlier projections of 207 million tonnes — helped the ASX 200 break through resistance at 5550/5560 today. Expect retracement to test support at 5550 and the rising trendline. Respect would confirm a medium-term target of 5700*.
* Target calculation: 5550 + ( 5550 – 5400 ) = 5700
ASX 200 VIX below 10 continues to indicate a bull market.
The Australian Dollar responded to the influx of international buyers, breaking resistance at $0.94. Follow-through above $0.945 would confirm a rally to $0.97. RBA intervention has so far proved ineffectual, but reversal below $0.94 would warn of a test of $0.92.
The Economic Cycle Research Institute, which claims a perfect recession-forecasting record, says an economic contraction is imminent. “We have not seen a slowdown where year-over-year payroll job growth has dropped this low without a recession,” ECRI states in a May report.
If, or when, the U.S. (and/or the global) economy does start to contract, commodity prices will tumble because of three factors…..
via The Threat From a Recession | News | News and Events | ECRI.
