Macro Extremes (week ending May 14, 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)

Wheat (now 7% below it intra-week high)

Coffee (3rd consecutive week, although it closed 5% below its intra-week high)

Zinc

Lumber (and fell 18% from previous weeks close)

Sugar (down 7% from last week’s close)

Corn (down 12% from last week’s close)

GBP/USD (indicating a strong British Pound against the U.S. Dollar) 

the AUD/USD (where it touched 0.7891

Overbought (RSI > 70)

Italian Government 10 Year Bond Yields (3rd consecutive week)

French & Korean Government 10 year bond yields (2nd consecutive week)

German, Spanish, Portuguese and Canadian 10 year bond yields

The US 10 year minus 2 year yield spread

The Commodities Indices (the CRB and Bloomberg’s)

Aluminium (for 12 consecutive weeks)

Tin (again)

Lean Hogs (for the 13th consecutive week and its highest price since October 2014)

Heating Oil (for 2nd consecutive week)

Gasoline

Gasoil

U.S. KBW Banking Index (11th consecutive week)

Nasdaq Transportation Index  (9th consecutive week)

Dow Jones Transport Index (10th consecutive week)

Sweden’s OMX 30 Equity Index (11th consecutive week)

France’s CAC-40 Equity Index (for the 5th consecutive week) and

Spain’s IBEX



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

Copper (now in its 22nd consecutive week of being Overbought)

Iron Ore (in its 5th week being Overbought, yet 4% below its intra-day high and 11% below last week’s high.)

Soybeans (overbought for 11 consecutive weeks & only 61% above its 200 Week Moving Average) and the;

Canadian Dollar / USD (3rd consecutive week of the quinella, where the CAD is exhibiting strength against the U.S. Dollar)

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)

Nil

Oversold (RSI < 30)

Nil

The Oversold Quinella – Both Oversold and Traded at < 2.5 standard deviations above the weekly mean)

Nil

Notes & Ideas:

The most notable observation is the return of government bond yields into Overbought territory.

importantly I am watching whether U.S. 10 year yields break above 1.75%

Last week the Canadian 10 year bond yields pulled back from their extreme highs (after 11 consecutive weeks ‘above the line’. This week, they have poked back into the Overbought range.

Leaving the Overbought realm were;

the S&P 500 Index (which fell early in the week, yet rose 2.8% from its intra-week low);

the Dow Jones Industrial Average (down 4.3% from its intra-week high) and

S&P Mid Cap 400 (which had a 5.5% intra-week range).

Other notable decliners, albeit they weren’t in extreme territory included;

Taiwan’s TAIEX equity index fell 8.5% (affected by the decline in the semiconductor industry and margin lending unwinding);

and accordingly, the Philadelphia Semiconductor Index which declined 4.2%.

Some energy commodities became overbought this week and WTI Crude and Brent Cruse are very close to doing the same.  

May 16, 2021

by Rob Zdravevski

rob@karriasset.com.au