Macro Extremes (week ending July 9, 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)

USD/KRW (does a stronger USD and weaker Korean Won mean cheaper Samsung phones and Hyundai cars?)

Overbought (RSI > 70)

Brent Crude Oil

WTI Crude Oil

Gasoil

Heating Oil

RBOB Gasoline

Tin (for the 11th week)

Iron Ore

Hot Rolled Coil Steel

France’s CAC-40 equity index (for the 13th consecutive week)

Switzerland’s SMI equity index (for the 4th week)

the Nasdaq 100

the S&P 500

and the Copenhagen, Stockholm and Helsinki equity indices.

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

Natural Gas

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)

AUD/USD (for the 4th consecutive week)

AUD/JPY (a weaker AUD and a stronger Yen suggests ‘risk-off’ is tiring)

Nikkei 225 equity index

Hang Seng China Enterprise Index (HSCEI) <see note>

Hang Seng (HSI) equity index 

U.S. Government 10 year bond yields (10’s),

the Australian (10’s),

Canadian, Chinese, U.K., Japanese and Swedish 10’s

the U.S. 10 year minus 2 year yield spread 

Oversold (RSI < 30)

Nil

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

Nil

Notes & Ideas:

This past week significantly produced a new wave of moves of 2.5 standard deviations below the Weekly mean, but not a single Oversold RSI Stochastic reading.

This tells me the downside moves are a fake-out and represent a trading Buy or at least, a bounce.

It’s time to prepare for when the new occurrences of extremes arise.

The week’s dominant price movers mainly featured losers in the soft agricultural’s, weakness in Asian equity markets https://robzdravevski.com/2021/07/08/chinese-stocks-are-not-popular/ and a lower AUD versus the U.S. Dollar and the Japanese Yen, some which are listed below.

Corn (10%), Wheat (6%), Sugar (5%), Soybeans (4%), Aluminium (3%), Cattle (2%), HSCEI (5%), Hang Seng (3%), Nikkei 225 (3%), Korean KOSPI (2%), Bitcoin (4%), Ethereal (8%) and Lumber (4%) which is nearing a $700 target.

And other commodity commentary saw Precious Metals have a benign week and while Brent Crude has a 7% weekly range (from top to bottom), it only declined 0.7% for the week from its previous close. Importantly, Brent remains in Overbought territory, as does a host of the energy complex.

In other big news, the Nasdaq 100 and the S&P 500 are making (yet, again) new All-Time Highs and still hanging around in Overbought territory.

Although my recent post suggests that it’s plausible and perverse that we see a higher leg in these indices depending on what the bond market does, as mentioned in this post.

Other equity indices closed near flat for the week, although ominously many had wide and whipsawing ranges which saw them either Bearish Outside Reversal Weeks (Singapore Straits Times) or where many made ‘lower highs and lower lows’, including the SOX Semiconductor Index, the Russell 2000, the S&P MidCap 400, the U.S. KBW Banking Index and the Dow Jones Transports.

The U.S. 10 year bond yield it yet to break above 1.75%. The yield fell to 1.36% from last week’s 1.43%, although bouncing from a 1.25% low. The 10’s remain bound in a larger range but we watch it broader capital markets could become explosive is the 10’s break either below 1.25% or above 1.65%.

And lastly, Bitcoin is trading 146% above its 200 Week Moving Average, which is slightly higher than last week’s 154% reading and certainly lower when compared to its 466% peak in mid-April 2021.

July 11, 2021

by Rob Zdravevski

rob@karriasset.com.au

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: