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Iron ore to the rescue

The ongoing rally in spot iron ore is making it difficult to sell either the ASX 200 index or the Aussie Dollar.  The prospect of winter output curbs in China is supporting iron ore and steel prices. A lot of this will drop through to the bottom lines of our cost efficient mining companies while at the same time providing a fillip to the “Luck Country’s” terms of trade

Bargain hunting in banks has also continued in early trade ahead of CBA’s profit release tomorrow. Australian bank results are anticipated to reveal modest growth against a back ground of low bad debt costs and steady net interest margins.

While CBA has joined the rally in bank stocks this week, it has not outperformed to any significant extent. Investors are sticking with the 4% risk adjustment made to CBA’s share price on Friday in the wake of the money laundering charges brought against it by Austrac

Recent history may be another consideration for stock traders today. The ASX 200 index is now back into the zone of resistance that has thwarted its advance on 3 separate occasions over the past 2 months. The question for traders will be whether today is the day to push past these levels as investors wait on upcoming profit reports

While rising commodity prices have seen the Aussie Dollar hold firm, it has lost upward momentum recently. This has seen its chart form a classic flat “distribution” pattern after a steep rally. In these circumstances any break below the 38.2% retracement level around .786 could herald the beginning of a deeper corrective decline. 

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