Clearing up. Fri Jul 23

The picture is clearing after strength in European and North American markets overnight. The European PMI number was better than expected while US figures were less bad. Combined with more good profit reports it lifted markets across the board.
Most indices have got approximately the same chart pattern at the moment and with the FTSE having pushed on to new recent highs, I expect us to follow. Here's the updated Xjo daily chart.

I'm still favouring resource stocks as most leveraged to a change of sentiment about a double dip recession and I've added to existing positions in Awc and Pna this morning, while selling odds and ends in Mre and Ost.
The sector which I've found the most difficult to assess recently is iron ore. I felt that most of the iron ore stocks would slide lower after completing a bounce from mid May to mid June. They did retrace, but unlike the steel stocks they've held higher levels.
I've gone long Fmg this morning at 416 because although I'm still confused about the chart, it could surprise to the upside and pop up to 450 quite easily while my stop is at 400.

Four days ago, I was pretty confident that Mgx, another iron ore stock that my assistant covers, was heading back down towards the May lows and that any rally could be shorted. Fortunately, we did nothing there, because the stock went through the pivot point at 150, which I thought would be decent resistance, and has shot straight through the earlier consolidation high of 160.5.

It indicates to me that the correction in the sector could be over. Of course, it could be stock specific but the market is forward looking and a renewed confidence in world economic growth may be more significant than a softening ore price.

3.30 Unlike most Fridays, the rally has held and gone again. We're up 2% and only just starting to pullback a jot now. The Xjo has passed the high set on July 15th and with the Dow looking good for some further strength tonight, it's probably why there hasn't been a sell down from early highs. If anything, it looks likely that stocks that have been shorted, will outperform through to the close. Aristocrat, Awe and Fmg are a few examples from my watchlist of beaten down stocks which are up 4% or more today.

Ipl has pretty much squeezed me out. I bought back a third on the open at 312 and another third at 317. If it pushes to 320 then I'll buy back the balance. Otherwise, the only other fly in the ointment is Linc, which has dropped back a couple of cents. Presumably, some short term bulls getting out ahead of the weekend while we're in this interim period as we wait to see if the Adani deal goes through.

4.12 A slight sell off left us with a gain of 1.9%. Fortescue held though, finishing at 421.