Macro Extremes (week ending May 28, 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)

Chinese Government 10 Year Bond Yields

Overbought (RSI > 70)

French & Korean Government 10 year bond yields (4th consecutive week)

The Commodities Indices (the CRB and Bloomberg’s)

Aluminium (following a 12 week streak and rest last week, it returns to the list, )

Tin (for the 5th week)

Copper (returning after last week’s break from a 22 week overbought streak)

Gasoil

Heating Oil

Lean Hogs (for the 14th consecutive week and its highest price since July 2014)

U.S. KBW Banking Index (13th consecutive week)

Dow Jones Transport Index (12th consecutive week)

France’s CAC-40 Equity Index (for the 7th consecutive week) and

Spain’s IBEX (3rd week)

the Helsinki 25 and Stockholm 30 equity indices



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

Canadian Dollar / USD (4th 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)

AUD / GBP (signifying a strong British Pound)

USD / CNY (a weak USD is translating into a strong Chinese Renminbi)

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

Nil

Notes & Ideas:

The most notable observation is that many assets which were Overbought over the past few weeks have either mean reverted or are on their way to doing so.

Something to watch are a host of global equity indices are nearing extreme Overbought readings.

The British Pound is strong against many currencies and within a whisker of being Overbought across a range of them.

A deletion from the list is Iron Ore, which was in its 7th week in overbought territory. It’s price fell 8% for the week to close at $189. Incidentally, it fell 15% during the week the it touched a low of $176. This is all considerably lower from its $225 high, only a few weeks ago,

The U.S. 10 year bond yield it yet to break above 1.75%. Yields eased further this past week to close at 1.58%.

Last week, I wrote that the the Russell 2000 seems to be in the early stage of a new downtrend. This is yet to be confirmed as it rose 2.5% in the past week. Interestingly, the index has been trading sideways since early February and odds are increasing of a break either way.

Gold as priced in USD and AUD (not in CAD) traded to 2 standard deviations (SD’s) above its weekly mean, although it’s not an ‘extreme’ as per this notes criteria of 2.5 SD’s.

And lastly, Bitcoin is 175% above its 200 Week Moving Average, which is down from last week’s 196% reading and certainly lower when compared to its 466% peak in mid-April 2021

No cryptocurrencies are Oversold yet.

May 29, 2021

by Rob Zdravevski

rob@karriasset.com.au