Macro Extremes (week ending June 11, 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)

Natural Gas

Orange Juice

Brazil’s Bovespa equity index

Overbought (RSI > 70)

The Commodities Indices (the CRB and Bloomberg’s)

Tin (for the 7th week)

Iron Ore (for 7 consecutive weeks)

Gasoil

Heating Oil

WTI Crude Oil

Brent Crude Oil

Lean Hogs (for the 16th consecutive week and its highest price since July 2014)

Corn (a return to the list)

the S&P 500 index

S&P 400 Mid Cap equity index

Amsterdam’s AEX equity index

France’s CAC-40 equity index (for the 9th consecutive week)

Germany’s DAX equity index

Italy’s MIB equity index (both for the 2nd week)

the Oslo, Helsinki and Stockholm equity indices (for the 3rd consecutive week)

and Australia’s ASX 200 (in its 2nd week and at its most weekly overbought since late July 2019)



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

Nil

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)

Japanese 10 Year Government Bond Yields (the granddaddy of risk indicators)

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 moves have mainly involved the bond market, where yields across the board have eased (meaning ‘risk is back on’ and bonds were being bought more aggressively).

This week, there are no bond yields in Overbought territory across any government debt.

We are also seeing the ‘energy complex’ continue their time in Overbought territory.

Gold moved lower after touching 2 (not 2.5) standard deviations above the mean in recent weeks, as it consolidates for now.

Other notable departures from the Overbought list are currencies and selected equity indices such as the Dow Jones Industrial Average and the KBW Banking Index, which ended a 14 week overbought streak.

So…as the ‘extremes’ list thins out, I look to identify assets which are ‘trending’ or about to develop one….before new extremes are posted.

Aside from entries in this week’s list, the global equity indices which were nearing extreme Overbought readings are South Korea’s KOSPI and India’s NIFTY.

The U.S. 10 year bond yield it yet to break above 1.75%. Yields eased further this past week from last weeks 1.55% to close at 1.46%.

Weekly movers in recently overbought commodities includes Lumber falling 18% and Soybean declined 5%, while the Baltic Dry (shipping) index rebounded 17%

And following up last week’s comments, we have seen a break higher in the Russell 2000 as it rose 2%. Small caps rising at the tail end of a large cap advance may be sign of a trap if you are chasing the riskier tail of the market.

In crypto land, Ethereum fell 13% negating the previous week’s 13% advance and still half the price from it May 10th high.

No cryptocurrencies are Oversold yet.

And lastly, Bitcoin had a benign week. It is trading 172% above its 200 Week Moving Average, which is lower from last week’s 181% reading and certainly lower when compared to its 466% peak in mid-April 2021.

June 13, 2021

by Rob Zdravevski

rob@karriasset.com.au