Too early to pull the trigger

Not just yet on buying the Iron Ore and Steel names.

I need the AUD, Iron Ore and selected stocks to all sync up and trade down to prices which are little lower than today’s closing prices.

September 20, 2021

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending September 17, 2021)

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)

Shanghai Composite equity index

Russia’s MOEX equity index

Bloomberg Commodity Index

Overbought (RSI > 70)

Hot Rolled Coil Steel (for the 51st consecutive week)

The Baltic Dry Index,

Amsterdam’s AEX,

and India’s NIFTY 50 equity index

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

Aluminium

Natural Gas

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)

Brazil’s BOVESPA equity index

U.K.’s FTSE 100 equity index

Oversold (RSI < 30)

None

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

Iron Ore

Notes & Ideas:

And this week’s list is smaller again as many asset as finding their new trends on their way to an ‘extreme’.

The larger advancers over the past week comprised of Natural Gas +3.4%, Baltic Dry Index +11%, WTI Crude +3%, Brent Crude +3.3%, Tin +2%, Wheat +3%, Cocoa +2.3%, Rice +2%, Heating Oil +3%, Gasoil +3.5% and Lumber and lean Hogs both rose 4%.

The group of decliners included Iron Ore (13%), Copper (4.6%), Platinum (2.7%), Gold (2.2%), Nickel (4%), Shanghai Composite (2.4%), China’s CSI 300 (3.1%), the HSCEI (4.8%), Brazil’s Bovespa (2.5%) and the Helsinki 25 (2.5%)

Notable deletes include;

Cocoa, Japan’s Nikkei 225 index, the Swiss SMI and the Nasdaq 100 index fell from its overbought levels, following the S&P 500’s departure from the list last week.

Incidentally, it staggers me how much energy is spent by market pundits ‘calling a correction’. Beyond the perspective that 10% decline in the S&P 500 would merely see it trading at levels seen this past May but it may surprise some readers that it has already cleaned 2.5% from its recent September 2nd intra-day high of 4,545.

Amongt the list of the week’s advancers and decliners, Silver’s decline of 6.5% caught my eye, adding to the previous week’s fall of 3.6%. Although it’s not trading at my ‘extremes’, it is already 2 standard deviations below its weekly mean.

In other news, Brazil’s Bovespa has now fallen 8% over the past 3 weeks and Iron Ore has halved since July 19th.

Media mentioned Aluminium’s climb to $3,000 but didn’t give a glance when it was $1,500 only a year ago.

Natural Gas continues to soar and has, ever since it broke above a resistance trend line which I wrote about in this post, The Mother of All Breakouts

September 19, 2021

by Rob Zdravevski

rob@karriasset.com.au

Are we entering a new Progressive Era?

I’ve been reading about a period of time in U.S. history which was known as the Gilded Age
https://en.wikipedia.org/wiki/Gilded_Age

and how it then turned into the Progressive Era
https://en.wikipedia.org/wiki/Progressive_Era

and trying to find parallels to the past 30 years and next 30 and whether history repeats.

Revising Iron Ore target lower

Iron Ore has now fallen to the $124 target (currently trading at $119) which I have been writing about, however I am now revising my downside target to the $99 level.

The chart below shows the price of Iron Ore converging to its 200 week moving average.

Mean reversion is another topic I have been harping on about lately too, especially amongst commodities and selected stocks which have soared to extremes and more so those price charts resembling parabolas.

This means I now look for Fortescue Metals (FMG.AX) to trade down to the $15.50 mark and BHP (BHP.AX) to visit $38.50 with $34.50 presenting a compelling entry point.

While all of that is going on, cheaper iron ore means better profits for steel makers.

September 16, 2021

by Rob Zdravevski

rob@karriasset.com.au

10 fold rise in Baltic Dry Shipping Index

As promised in the immediately previous post, below is a chart of the Baltic Dry Index.

It has risen 10 fold over the past 16 months.

How can these rising prices not be passed into the price of the finished product?

#inflation

September 12, 2021
by Rob Zdravevski
rob@karriasset.com.au

Shipping costs soaring

“Container shipping remains the star. It now costs $14,287 to haul a 40-foot steel box from China to Europe. That’s up more than 500% on a year earlier and is pushing up the cost of transport everything from toys to bicycles to coffee.”

In the next post, I’ll send a chart of what the Baltic Dry Index has done over the past 16 months.

https://www.bloomberg.com/news/articles/2021-09-12/the-world-s-shippers-are-earning-the-most-money-since-2008?sref=qLOW1ygh

Macro Extremes (week ending September 10, 2021)

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)

Cocoa

Shanghai Composite equity index

Russia’s MOEX equity index

Japan’s Nikkei 225 index

Overbought (RSI > 70)

Hot Rolled Coil Steel (for the 50th consecutive week)

Natural Gas

the Nasdaq 100 index

Amsterdam’s AEX,

and India’s NIFTY 50 equity index

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

Aluminium

Assets (securities) within my immediate universe 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)

Iron Ore

Brazil’s BOVESPA equity index

Notes & Ideas:

This past week continued last week’s general muted state of activity especially amongst currencies and equities.

Notable departures from the list included the previously overbought Cattle, the S&P 500 and the Nordic stock exchanges.

This list is the smallest over the past 6 months.

The larger advancers over the past week comprised of Aluminium +7%, Natural Gas +5%, Nickel +4%, Copper +2.7% and China’s Shanghai and CSI 300 indices both rose 3.4%.

The Shanghai Composite has risen 8% in the past 3 weeks….

The group of decliners included Platinum (6.3%), Wheat (5%), Sugar (4%), Silver (3.6%), Tin (3.3%), Coffee (2.5%), Cocoa (2%), Gold (2%), Nikkei 22 (2.8%), S&P Midcap 400 (2.7%), both Dow Jones and Nasdaq Transportation indices fell 2.7%, the Bovespa, SMI and Kospi declined (2.3%), Spain’s IBEX (2%), the Dow Jones Industrial Average (2%), the S&P 500 (1.7%) and Australia’a ASX 200 fell 1.6% for the week.

September 11, 2021

by Rob Zdravevski

rob@karriasset.com.au

Economy Health Check

I’m watching the Copper/Gold Ratio (HG/GC)

Its direction tells me about the health of the economy.

The direction of the HG/GC also helps confirm the direction of interest rates. More specifically, the U.S. government 10 year bond yield.

In the chart below, I’ve overlaid a price chart (in blue) of the S&P 500 against the HG/GC.

You can see that the general direction of both the SPX and the HG/GC follow each other.

At this moment, the HG/GC is nearing a point where it breaks either way.

We’ll need to wait and watch in the coming week or so.

In my earlier post today, I imply that interest rates may rise.

This, then suggests that the HG/GC breaks higher (meaning Copper rises and Gold declines) which translate into the S&P 500 rising further.

A ‘melt-up’ in the S&P 500 is not a perverse idea, especially against the grain of many who are calling the top, let alone a crash.

It may seem odd to think, but markets often move to where they can do the most damage…..

and going higher can damage those who have been on the sidelines or sold up recently.

Missing out can also hurt investors.

September 10, 2021

by Rob Zdravevski

rob@karriasset.com.au.

Watching interest rates closely

Watching some macro signals today.

In the chart below, I’m watching the U.S. Year government bond yield.

Notice how over the past 6 weeks, the 10’s are making ‘higher highs’ and ‘higher lows’.

Now, they need to hold 1.265%. If they do, then they should test 1.385%.

If they break 1.385%, then 1.47% and 1.57% are next important levels to test.

Recently, rising interest rates have favoured cyclical and industrial equities, while falling yields have given the ‘technology’ stocks a boost.

September 10, 2021
by Rob Zdravevski
rob@karriasset.com.au.

Trading Buy – Iron Ore

At the time of writing, Iron Ore is trading $136.

It’s close to the $132 mark which is the upper end of the circled range in my article link below.

$132 is also its 100 week moving average.

Albeit there is a gap in the chart at $124.50 and I think it could be ‘backed and filled’, notwithstanding an additional 4%-7% decline, Iron Ore is nearing the region of a ‘trading buy’, which may give buyers a 35% bounce up to the $180 mark.

#ironore

September 8, 2021

by Rob Zdravevski

rob@karriasset.com.au.

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