Macro Extremes (week ending June 18, 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

Live Cattle

India’s Nifty 50 equity index

Chinese 10 year bond yields

Overbought (RSI > 70)

Tin (for the 8th week)

Gasoil

Heating Oil

WTI Crude Oil

Brent Crude Oil

France’s CAC-40 equity index (for the 10th consecutive week)

Korea’s KOSPI Index

and Australia’s ASX 200 (in its 3rd 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)

Switzerland’s SMI equity index

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)

Soybeans

AUD/USD

NZD/USD 

Oversold (RSI < 30)

Nil

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

Nil

Notes & Ideas:

A diminishing list of extreme readings continues as trend change direction and mean reversions take place.

The massive moves in global markets over the past week were seen in the commodity markets.

After weeks of overbought extremes (which is what I write about in this weekly missive), e saw the following declines;

Iron Ore (5%)

Gold (6%)

Leans Hogs fell 11% and broke a 16 week ‘extreme’ streak

Copper (8%)

Coffee (5%)

Lumber (20%)

Platinum (10%)

Sugar (6%)

Silver (8%)

the CRB Commodity index (3%)

Corn (8%)

Soybean (11%)

Other overbought extreme streak-makers included;

the KBW Banking Index fell 8% (I now see buying opportunities in selected U.S. banking stocks),

the Dow Jones Industrial Index (3.5%)

DJ Transports Index (4.6%)

the Russell 2000 (4%) and

the MidCap 400 (5%)

There is merit in referencing past weekly editions of ‘Macro Extremes’ to check the assets which were ‘peaking’ before the current mean reversion has commenced.

We also saw strength in the U.S. Dollar (against consensus thinking) with 3% declines for the week seen in the AUD and CAD against the greenback.

The U.S. 10 year bond yield it yet to break above 1.75%. Yields eased further this past week from last weeks 1.46% to close at 1.44%.

Other notable moves included the Baltic Dry (shipping) index  climbed a further 12% following last week’s 17% advance.

Cryptocurrencies has a negative week across the board (and especially during today’s Sunday session).

During the week, Bitcoin fell 14%, Ethereum tanked 18%, Litecoin slumped 15% and Ripple declined 20%.

Incidentally, no cryptocurrencies are Oversold yet.

And lastly, Bitcoin had a benign week. It is trading 158% above its 200 Week Moving Average, which is lower from last week’s 172% reading and certainly lower when compared to its 466% peak in mid-April 2021.

June 20, 2021

by Rob Zdravevski

rob@karriasset.com.au