Iron ore and Baltic Dry technicals point south

A little technical analysis always helps, despite what some Luddite fund managers think. Here’s a little from Credit Suisse on iron ore and the Baltic Dry, both which accord with my own thoughts:

 

Since August last year iron ore has been locked sideways in a range just above former key short-term support at $131.32/130.56 – the 38.2% retracement of the September 2012/August 2013 rally and potential trend-line support. We have been bearish and looked for a break of this flagged level to set a new top (c.f. Iron Ore topping risks mount). Prices have now decisively removed this level and have plunged lower to our initial target at $122.80/121.4, measured objectives and the 50% retracement level. We allow for an initial bounce here, but look for a break below it to aim at the 61.8% retracement level at $114.28 next. We would expect an initial bounce here, but also expect an eventual breakdown to test key medium-term support at the $110.40 – the May 2013 low. We look for a more concerted basing effort here and through it needed for a medium-term top for $103.70 then the $86.70 2012 low.

The Baltic Capesize index has collapsed after its late 2013 rally was capped at the top end of the broader multi-year range now at 4,233. The break down through the October 2013 low has set a bigger top within the range and signals a more extended turn lower.

We look for a move down the August 2013 low at 1,805 next, where we allow for a bounce. Beneath here would see a more extended bearish phase and target the low end of the range at 1,216/09 which we would look to provide a floor. Beneath here is needed for a test of the 2012 1,087 low and through it for a test of the 830 2008 trough low.

Resistance shows first at the 2,164 low, which ideally caps to keep the trend directly lower. Above 2,771 aims at 3,061, but through 3,352 to see a retest of the range highs at 4,233/329.