Macro Extremes (week ending April 2, 2021)

This week’s list has shortened suggesting that many assets breaching ‘extremes’ have since eased to resume trading within a normal range’.

And so, during the past week, the following assets (on a weekly timeframe) registered an Overbought reading or traded more than 2.5 standard deviations below its rolling mean

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

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Overbought (RSI > 70)

Canadian 10 year bond yields (for 7th consecutive week)

Korean 10 year bond yields

U.S. Government 5 & 10 year bond yields (for 7th consecutive week)

Aluminium (for 6th consecutive week)

Lean Hogs (for the 7th consecutive week and its highest price since October 2014)

Corn (for the 16th consecutive week & trading 46% above its 200 Week Moving Average)

AUD/JPY (an important risk indicating currency)

USD/TRY (Turkish Lira)

USD/DKK (a weaker Danish Krone makes your Vestas wind turbines, Lurpak butter & LEGO cheaper)

U.S. KBW Banking Index (5th consecutive week)

Nasdaq Transportation Index  (4th consecutive week)

Dow Jones Transport Index

S&P Mid Cap 400 (4th consecutive week)

Sweden’s OMX 30 Index (4th consecutive week)

Bitcoin, Ethereum & Monero

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

USD/HKD

USD/JPY

(in both cases, suggesting the USD is strong versus the weakness of the opposing currencies)

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;

EUR/GBP

EUR/USD 

(meaning a weak EUR suggests selling British Pounds or U.S. Dollars in order to accumulate Euro)

Cocoa

Notes & Ideas:

Last week’s edition was laden with commentary and ideas still worthy of noting and digesting.

Assets such as Tin & Copper have pulled back from recent loftiness, thus t’s worthy to highlight the streaks in this weeks list  where the ‘extremes’ seem to be extended, such as….Transports, Banking, Aluminium, U.S. MidCaps, Canadian and American Government bond yields & Lean Hogs.

I am paying too much for bacon !

Some other macro ideas are;

Buy U.S. 5 & 10 Year Bonds (expecting prices to rise and yields to fall)

Sell USD / Buy Yen (there are some interesting Japanese equity ideas in my equities universe)

I think the Mid-Cap 400 and , U.S.  banks & Transports are next to pullback.

That 2 year and 10 year bond yield spread has fallen from 1.59% to 1.51% 

And, Bitcoin continues to trade at 430% above its 200 Weekly Moving Average.

April 4, 2021

by Rob Zdravevski

rob@karriasset.com.au