Iron Ore to double dip

Iron Ore too….is yet to make a new higher high.

Last week’s intraday high of $132.30 remains shy of October ’21’s $132.60 high.

In addition, trading in Iron Ore futures, on January 13th, 2022 produced a bearish outside reversal day.

I see risk in Iron Ore equities. The bounces have been impressive and taking the ‘fat part’ of the trade should satisfy many.

The advance wasn’t accompanied with robust volume.

I think this market will hurt the latecomers who have bought in the past week.

Markets do that sort of stuff. Shaking out those who shouldn’t be there…..is part of a market’s modus operandi.

Intuition suggests that we’ll see a test towards or close to recent lows. Perhaps I’ll call it a ‘double dip’.

At that stage, we’ll watch for any new ‘lower lows’ or where we see a consolidation.

There are plenty of ‘gap-ups’ to back and fill and the recent rally in those equities gives many a second chance to exit.

For some, it could be a ‘get out of jail free’ card.

#fmg #rio #bhp #min #ironore

January 17, 2022

by Rob Zdravevski

rob@karriasset.com.au

Oil about to hit a 3 1/2 year high

It’s an important coming day or two in Brent Crude Oil trading.

I’m watching if it trades above $86.68.

Friday’s high was $86.52.

That means it makes a ‘higher high’ seen on October 25, 2021.

Albeit, a ‘higher high’ while also recent making a ‘lower low’ portends for an extension of the current rally, on a Daily basis, Brent is now in Overbought territory and 2 standard deviations above its mean.

Whilst the chart below is current, it has notes on it from a post on November 5th, 2021, which also shows the previous high in Brent at $86.71 from October 3, 2018.

January 17, 2021

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending January 14, 2022)

The following assets (on a weekly timeframe) registered an Overbought reading or traded more than 2.5 standard deviations above its rolling mean.

Extremes “above” the Mean (at least 2.5 standard deviations)

Portugal 10 year government bond yields

Overbought (RSI > 70)

U.S. 2 and 5 year bond yields

Australian 2 and 5 year bond yields

Russian 10 year bond yields

Australian Coal

Coffee

Lumber

Tin

The Overbought Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)

Japanese 10 year bond yields

Assets (securities) which touched the other side of the extreme, being Oversold (where the RSI is < 30) or were at least 2.5 standard deviations below its mean are;

Extremes “below” the Mean (at least 2.5 standard deviations)

None

Oversold (RSI < 30)

Sugar

The Oversold Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean.

None



Notes & Ideas:

The big news in global markets was the relative quiet action in equity indices.

Equally, bond yields were more subdued this past week, except for the Australian 2 year government bond yield, which soared from 0.46% to 0.76%.

With the Australian 10’s unchanged for the week, the Aussie government 10 year minus 2 year bond yield spread hit a new weekly low, not seen since August 16, 2021 and February 1st, 2021.

Those moments signalled the beginning of a rally in the ASX 200 equity index.

Last week, I wrote that the German 10 year bonds moved from (0.18%) to (0.04%) and from a price of (0.38%) 3 weeks ago. Alas, the German 10’s didn’t turn positive closing unchanged at (0.037%).

Seeing Japanese 10 year bond yields double last week from 0.07% to 0.14%, they continued their rise to 0.165%. More about JGB’s later.

Additionally, the Japanese Yen rose from its multi-year low.

In other news and observations, Soft Agricultural’s were weaker, Coal, Gas and Oil were higher for the week as were some base metals, Hot Rolled Coiled Steel rose 1.6% and moved out of Oversold territory. The Russian equity index is nearly Oversold, the Nikkei 225 looks like like commencing a new decking trend, the Nasdaq 100 and the CRB (Commodity) Index is nearly Overbought while the mean reversion in assets such as the Japanese Korean Marker (JKM) is on its way.

The larger advancers over the past week comprised of; 

Aluminium 2.7% (up 7.5% in 2 weeks), Australian Coal 4.1% (up 12% in 2 weeks), Rotterdam Coal 9.8% (up 27% in 2 weeks), Bloomberg Commodity Index 2.2%, China Coal 4.9% (mimicking last week’s return), WTI Crude 6.2% (up 11% in 2 weeks), Gasoil 5.2% (up 12% in 2 weeks), Heating Oil 6.1%, Lumber 6.6%, Tin 3.8%, Natural Gas 8.8%, Nickel 4.1%, Orange Juice 5.3%, Gasoline 5.2%, Silver 2.3%, CRB 3.2%, Brent Crude 5.5%, HSCEI 3.9%, Bovespa 4.1%, Istanbul 2.9%, Singapore Strait Times 2.4%, SOX 2.8% and India’s Sensex rose 2.5%.

The group of decliners included ;

Baltic Dry Index (23%) (having fallen from a October 4 high of 5,650 to 1,764), the Japan Korea Marker “JKM” (26%), Palladium (2.3%), Oats (8.9%), Wheat (2.2%), Soybean (2.9%), Corn (1.7%), Rice (1.4%), Urea (2.4%), CSI China 300 (1.6%), DJ Transports (2.2%), MOEX (4.2%), Swiss SMI (2.1%), Shanghai Composite (1.6%), Stockholm 30 (1.8%), Helsinki 25 (1.8%), Copenhagen 25 (2.8%) adding to last week’s 5% decline.



January 16, 2022

by Rob Zdravevski

rob@karriasset.com.au   

Bond yields mean revert from their trough

I’ve made many references about the ‘Mean Reversion Trade’, mainly from the perspective prices retracing lower following wild, parabolic moves.

In the weekly chart below, we see a mean reversion starting from the other side.

The U.S. 10 year bond yield eventually worked its way back up to its 200 week moving average, touching that market during last week’s rally.

Incidentally, this has occurred at the same time that we saw the yield reach an ‘extreme’ 2.5 standard deviation (as mentioned in this week’s edition of “Macro Extremes”) above its rolling weekly mean.

Probability suggests a pullback in yields over the next week or three, which also could correlate to a ‘pop’ in the price of high growth tech stocks.

January 10, 2022

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending January 7, 2022)

The following assets (on a weekly timeframe) registered an Overbought reading or traded more than 2.5 standard deviations above its rolling mean.

Extremes “above” the Mean (at least 2.5 standard deviations)

Italian 10 year government bond yields

U.S. 10 year government bond yields

Japanese 10 year yields

USD/JPY

Soybeans

Dow Jones Industrial Average

Stockholm 30 Index

Taiwan’s TAEIX equity index

Overbought (RSI > 70)

U.S. 2 and 5 year bond yields

Coffee

Lumber

The Overbought Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)

None

Assets (securities) which touched the other side of the extreme, being Oversold (where the RSI is < 30) or were at least 2.5 standard deviations below its mean are;

Extremes “below” the Mean (at least 2.5 standard deviations)

EUR/GBP

Sugar

Oversold (RSI < 30)

Hot Rolled Coil Steel (HRC)

The Oversold Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean.

None



Notes & Ideas:

The big news in global markets was the surge in government bond yields.

The yield in German 10 year bonds moved from (0.18%) to (0.04%). 3 weeks these yields rose from a low of (0.38%). Equally, French ’10’s’ soared from (0.03%) to 0.28%.

While Japanese 10 year bond yields doubled from 0.07% to 0.14%.

I want to emphasise the fact that rates amongst many government bond yields have doubled over the pat week or three. The quantum of ‘doubling’ is worthy of note.

In other news, U.S. equity indices were the obvious losers, except for the U.S. Banks which make more money when interest rates rise. Meanwhile, the energy commodity complex lead the advancers.

The Japanese Yen traded at its weakest price (versus the U.S. Dollar) since January 9, 2017.

Lastly, Platinum and Gold registered Bearish Outside Reversal Week and the Nasdaq entered a new weekly downward trend.   

The larger advancers over the past week comprised of; 

Aluminium 4.8%, Australian Coal 7.7%, Rotterdam Coal 16.8%, Bloomberg Commodity Index 2.1%, Baltic Dry Index 3.2%, China Coal 4.9%, WTI Crude 4.9%, Gasoil 6.8%, Heating Oil 6.5%, JKM 11.3%, Coffee 5.5%, Lumber 7.4%, Natural Gas 5%, Gasoline 3.3%, CRB Index 2.4%, Dutch TTF Gas 25.4%, Brent Crude 5%, Uranium 8.6%, Corn 2.3%, Soybeans 5.3%, KBW Banking Index 10%, Singapore’s STI 2.6% and India’s Sensex rose 2.6%

The group of decliners included ;

Gold (1.8%), Hogs (2.2%), Cattle (1.7%), Sugar (4.4%), Silver (4%), Wheat (1.6%), Oats (2.2%), Shanghai Composite (1.7%), China CSI 300 (2.4%), Bovespa (2%), S&P 400 MidCap (1.8%), Nasdaq 100 (4.5%), Copenhagen 25 Index (5%), Russell 2000 (2.9%), SOX (3.8%) and the S&P 500 declined (1.9%) 



January 9, 2022

by Rob Zdravevski

rob@karriasset.com.au   

Pasta consumption still growing

Lately, I’ve been writing about the price of wheat, which prompted a review of a post I wrote in 2012 where I discuss one of my favourite uses of (durum) wheat, being Pasta.


In the original 2012 post I was willing Great Britain to lift its consumption game.

https://robzdravevski.com/2012/09/02/global-pasta-consumption-room-for-growth/


The source of the figures below is from possibly one of the world’s most important organisations, being the International Pasta Organisation. Watch out OPEC…..


They have a clear mission…… THEY ARE NON PROFIT ASSOCIATION DEDICATED TO INCREASE PASTA CONSUMPTION AND AWARENESS…….


Here is a list of the average amount of kilograms of pasta each resident in the following country consumed in 2011


Italy 26.0 kg 

Venezuela 13.0 kg

Tunisia 11.9 kg
Greece 10.4 kg

USA 8.8 kg
Chile 8.4 kg

France 8.0 kg
Germany 7.9 kg
Argentina 7.2 kg

Iran 7.0 kg

Portugal 6.6 kg

Turkey 6.4 kg
Brazil 6.4 kg

Czech Republic  6.0 kg
U.K. 2.5 kg

Then. in 2019, they consumed…..


Italy 23.1 kg 

Tunisia 17 kg

Venezuela 12 kg

Greece 11.4 kg

Chile 9.5 kg

USA 9 kg
Argentina 8.7 kg

Turkey 8.6 kg

Iran 8.7 kg

France 8.1 kg

Germany 7.7 kg

Portugal 6.5 kg

Czech Republic  6.5 kg

Brazil 5.8 kg

U.K. 3.5 kg


Surprisingly, Italian and Brazilian consumption declined through the decade.

Argentine and Turkish consumption increased handsomely, while Tunisians and Brits ate 40% more pasta on a per capital basis.


Incidentally, the largest pasta consumption market is the United States at 2.7 million tons, followed by Italy at 1.4 million tons and then Brazil is third at 1.2 million tons.

Overall, total global pasta production has grown from 12.5 million tons in 2011 to 16 million in 2019.

I wonder if many Italians emigrated to Argentina over that time to account for the decline in Italy and an increase in Argentina ??

January 7, 2021

by Rob Zdravevski

rob@karriasset.com.au

Bitcoin on support but converging to WMA

Bitcoin needs to hold $42,333 for now.
It’ll be telling for other risk assets,
Bitcoin could see the $26,000 – $23,000 level
More on other support levels #bitcoin later,
but isn’t trading at 500% above its 200 weekly moving average anymore, instead it’s now 126%.

Below is a weekly chart, the 200 week moving average has risen from $15,000 to $20,000 over the past 4 months, which is in keeping with my price and moving average convergence post dated, October 18, 2021.

January 6, 2021

by Rob Zdravevski

rob@karriasset.com.au

Cheaper Wheat is good for Kellogg’s

On November 25, 2021, when Wheat was trading at $8.50, I suggested Selling.

Soon after, it traded down to the range mentioned in that post.

Now it’s $7.54.

Should it trade below $7.51, then I think it’s on its way to its next level lower, towards the $7.21 region.

If the medium term downtrend strengthens, I’ll look for the price of Wheat to visit to $6.78.

That would represent a 78.6% retracement of the advance which commenced in early September and it coincides with a 61.8% pullback of the larger rally which began in July 2021.

The notes (see links) below were written in July 2021, predicting the bounce in Wheat.

and written slightly before this,

And the winner is and will be…..Kellogg’s share price.

‘As a grain-based food company, the success of Kellogg Company is dependent on having timely access to high quality, low cost ingredients,….’ – source: Kellogg Company 2020 annual report.

December 6, 2021

by Rob Zdravevski

rob@karriasset.com.au

Kazakh Unrest and Uranium Prices

Unrest in Kazakhstan has seen shares in Kazataprom fall 8% overnight. The Uranium (front contract) price spiked 9%. Equity prices of uranium producers/explorers also jumped before settling below their intraday highs.

“Kazatomprom is the world’s largest producer and seller of natural uranium, providing over 40% of global primary uranium supply.”

As per chart below, I’m watching it makes a new ‘lower low’ below the recent low of US$33.35.

If so, Kazatomprom will be a better buy around the US$28 mark.

December 6, 2021

by Rob Zdravevski

rob@karriasset.com.au

Conditioning For Lower Returns

Most of the investing world measures annual performance at the end of December 31st.

The media and pundits make themselves seem clever by reporting what has already happened.

You must remember that they are reporters and not market professionals or investors.

What is the difference?  

Journalists and commentators seldom (if at all) take any risk with their own or while advising and managing other people’s money.

While it’s informative, it’s not visionary and it doesn’t help anyone’s past nor prepare anyone for the future.

What is more important that simply reporting the past 3 years of performance figures….

S&P 500

2019 29%

2020 16%

2021 27%

Nasdaq 100

2019 36%

2020 50%

2021 27% 

…..is to ponder what to expect in the coming year or so.

While that prediction is impossible, the best guidance I can offer readers is that these type of returns are not to be taken for granted and certainly not to be extrapolated or ‘banked on’ in the future.

It’s more plausible to expect 2022 numbers to come in at +7% or (5%).

Consider conditioning oneself for lower returns.

Why?

Unscientifically;

Winning streaks come to an end,

Many think it’s their god-given right to earn 20% every 2 months, 

Those type of returns are extraordinary when compared to the cash rate,

Persistent extraordinary performance are eventually subdued,

Elastic Bands and Pendulum snap back and 

When I posed an investment idea which I thought may provide a 15% return over the next 18 months, the investor responded with “it’s hardly worth making that investment for such an average result”.

Mathematically, we may argue whether earnings expand, investors pay even higher prices for those future earnings or what has been or isn’t already factored or discounted.

Meanwhile the ASX 200 Index performance has been;

2019 19%

2020 (2%)

2021 13%

January 3, 2022

by Rob Zdravevski

rob@rkarriasset.com.au

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