Data Diary

Metals sector to join the correction?

Posted on 28 January 2010

Iron cuticles reporting for duty…

Leadership in the Australian market’s rally since March 2009 has come from financials and the materials sectors.  It was notable then that the recent high in the All Ordinaries was not matched by the financials.

XXJ was rejected off the longer term downtrend from the September 2007 peak while it has definitively broken the Mar-09 uptrend.  With the weekly MACD crossing over, expect further weakness in the sector.

Turning to the materials sector.  While that line from March remains unbroken, the trend is up. Yet there are signs of weakness that will be a worry to those with their Tonka trunks full of dirt.

Is that weekly MACD turning over?  Considering the weakness in the AUD and CAD – seems like something is afoot.  Both have broken their uptrends and have formed double tops…

And then there is the Baltic Dry Index – that peaked in November and has been dithering through January looking for direction – while the CRB has similarly pulled back from its January highs.

On balance, the current selloff has more legs.  Having pulled back in a hurry, we may pause for a smoko, but for mine the risks are to the downside with a test of the 200 day MA (XJO ~4350) the most likely scenario.