Strike While the Iron Ore Opportunity Is Hot
Iron ore. It usually takes a back seat to the more headline-grabbing raw material markets like copper and crude oil. But on March 7, that all changed when iron ore prices rocketed a staggering 19% in its largest single-day rally ever.
And suddenly, it was like "'Oil' who? Get me an interview with ore!"
Let's say, for argument's sake, such an interview actually took place; it may have gone something like this:
Reporter: "Ore, baby! What in the world's come over you? The experts are saying you've gone 'berzerk.' How do you respond to such allegations?"
Ore: (silent... because, well, it's a rock)
About those allegations, though -- that is what the experts claimed. That iron ore prices were in fact acting, well, "berzerk."
"Iron ore jumps most on record as market goes 'berzerk. The [market has] departed from fundamentals." (March 7 Bloomberg)
And -- "Colorful theories [aside]... Many conditions remained favorable, though they did not fully explain this rapid rise of the past two days." (March 8 ABC Online)
Honestly, who could blame them for thinking ore had gone off its meds? After all, it was only a few months ago that ore prices were circling the drain of a decade low, having earned the title of "worst performing major commodity of 2015." (December 22 Business Insider)
And, as far as the news-following market analysts could tell, iron ore's backdrop was more packed than a clown car with bearish fundamentals. Here, the following news items from the time paint a very "Grizzly" picture:
• "Here's Why Iron Ore Prices Aren't Rising Anytime Soon... We are bracing for an extended period of depressed prices." (November 4, CNBC)
• "Risks in iron ore remain titled to the downside amidst stubborn oversupply and weak demand." (December 21, CNBC)
• "The ending of China's super-boom spells pain with no end in sight. Among industrial commodities, iron ore prices have tumbled 40% this year...the rout is seen stretching into next year." (December 31, Reuters)
So, yes! It would seem crazy for ore to rally now in light of the fact that none of the market's bearish fundamentals have been resolved.
But if you've seen the many examples we've shown on these pages, it takes more than fundamentals to drive a market. The collective psychology of investors, which unfolds in Elliott wave patterns on the market's price chart -- plays a huge role.
To that end, iron ore's seemingly "berzerk" rally is a bona-fide Elliott wave pattern at work -- one our own Asian Pacific Financial Forecast has been on top of from the very beginning of the metal's "crazy" reversal. Take a look: