Macro Extremes (week ending August 27, 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)

Cocoa

EUR/AUD

Overbought (RSI > 70)

Hot Rolled Coil Steel (for the 48th consecutive week)

Switzerland’s SMI equity index (for the 12th week)

the Nasdaq 100 & S&P 500 index

Amsterdam’s AEX, Copenhagen’s 25 and Helsinki equity indices

and India’s NIFTY 50 equity index

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

cryptocurrency, Cardano

Cattle

Orange Juice

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)

Korea’s KOSPI equity index

Oversold (RSI < 30)

None

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

None

Notable deletions from last week’s list include;

Italy’s overbought MIB,

the oversold Russell 2000 small cap index which bounced 5% this week,

a range of oversold commodity based currencies

and oversold Chinese equities (those indices rose 2.5% in the past week)

Notes & Ideas:

This past week was a story of rising government bond yields, soaring commodity prices (which is some relief for the many is clear downtrends) while most equity indices advanced.

Although, as the list above shows, not many entrants in the ‘extreme’ category. Many prices are meandering around and (marginal) trade opportunities are to be found in those developing new trends

The DXY and various currencies are worth keeping an eye on too.

The JGB’s are still suggesting ‘risk-on’ for equities are they rise slightly having closed at 0.02%, which is above a resistance line I’m watching. 

Last week, I also wrote about another risk appetite predictor in the U.S. 10 year minus Australian 10 year bond yield spread which is now firmly above an important resistance line.

Equities have every possibility of ‘melting up’ and not down.

There weren’t many decliners in the past week.

It’s a complete turnaround from last week’s sea of red.

The Advancers included Brent Crude 11.7%, WTI Crude 10.6%, Gasoil 9.6%, Heating Oil 10.6%, Natural Gas 14%, Gasoline 4.7%, Aluminium 4%, Gold 2% (its best week since mid-May), Hogs 2.4%, Copper 4.4%, Coffee 5.9%, Cattle 11%, Silver 4%, Corn 3.5% and Soybeans 2.5%…all goes towards explaining the 6% rise in the CRB Index.

Amongst equity indices, the TAIEX 5.3%, Russell 2000 and SOX both rose 5%, the Nasdaq Transports 4.1%, the DJ Transports 2.4%, Nikkei 2.3%, HSCEI 2.4%, Shanghai 2.7%, and the Midcap 400 rose 3.4%.

The most notable mover in crypto land was Cardano rose 7%, compounding last weeks +14% and 52% from the previous week. 

And lastly, Bitcoin is trading 222% above its 200 Week Moving Average, which is lower than last week’s 230% reading and notably higher than the reading of 140% seen 8 weeks ago, while certainly lower when compared to its 466% peak in mid-April 2021.

August 29, 2021

by Rob Zdravevski

rob@karriasset.com.au