The ASX 200 index looks like setting a new high for the year today. For traders looking to assess the potential for an ongoing year-end rally, the degree of bullish conviction on display will be important. A narrow move into new high territory and a soft finish would leave an open question about the market’s appetite for further strong gains over the remainder of the year.
Mining stocks will support the market today following another rally in metal prices, especially iron ore. The rally in iron ore over recent months has wrong footed many investors who anticipated that China’s winter environmental controls would have a far more negative impact on the spot price than has been the case so far.
The answer to the market conviction query is likely to lie in the extent to which other sectors support the rally in mining stocks today. Confidence will be supported by the overnight rally in US stocks. The question is whether our market pre-empted that yesterday after news that Congress and the Senate had agreed on a compromise for the US tax reform bill. If the ASX 200 is pushed well clear of the 6052 high and finishes near the high of the day, chart followers will get a confidence boost.