Macro Extremes (week ending November 19, 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)

Gold in AUD and USD

Rice

Overbought (RSI > 70)

Australian 5 year government bond yields

New Zealand 10 year government bond yields

U.S. 2 year government bond yields

the JKM “Japan/Korea (LNG) Marker”

LNG

Coffee

Tin

Urea 

France’s CAC-40 equity index

The S&P 500 & Nasdaq 100

And Amsterdam’s AEX equity index



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

U.S. Dollar (DXY) Index

Philadelphia Semiconductor (SOX) Index

Assets (securities) 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)

GBP/USD – suggesting a weaker British Pound 



Oversold (RSI < 30)

Iron Ore



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

EUR/USD – suggesting a weaker Euro



Notes & Ideas:



An even milder week was seen in the world of commodities, currencies, commodities and debt. Volatility is subdued and we are experiencing something we may call consolidation or digestion. In some cases, there is some migration towards and test the other side of the mean.

In other news, Wheat is nearing an overbought level, the Baltic Dry Index has halved in the past 4 weeks, Turkish Banks have climbed 40% in 5 weeks (since my October 14th note) and Crude Oil has fallen 11% in 3 weeks. That peak of $85 coincided with Wall Street analysts calling for an $110 oil price. 

It pays to observe the herd, ignore the media squawk and ponder the contrarian view.

Extraordinary moves were seen in Lumber, Gas, Crude and Heating Oil, while divergence was noticed amongst declines in the U.S. transports, bankings, mid cap and small equity indices.

The larger advancers over the past week comprised of Cocoa 2.3%, the US dollar (DXY) Index 1%, JKM 8.5%, Coffee 5.2%, Lumber 28.9%, LNG 14.4%, Natural Gas 5.7%, Dutch TTF Gas 15.1%, Rice 3.2%, Rotterdam Coal 4.5%, Urea 3%, Nasdaq 100 2.3%, Philadelphia Semiconductor Index (SOX) 3.1% and Istanbul’s BIST equity index rose 5.1%. 

The group of decliners included Baltic Dry Index (9.1%), WTI Crude (6%), Gasoil (5.9%), Heating Oil (4.6%), Lean Hogs (2.8%), Orange Juice (2%), Platinum (4.9%), Gasoloine (4.3%), Silver (2.2%), Brent Crude (4.3%), China Coal (2.6%), Bitcoin (10.3%), AUDGBP (1.6%), AUDJPY (1.2%), AUDUSD (1.4%), EURGBP (1.6%), TRYUSD (12.3%), KBW Banking Index (2.7%), Dow Jones Industrial Average (1.4%), IBEX (3.6%), Bovespa (3.1%), Sensex (1.9%), Russell 2000 (2.8%), Nasdaq Transports (2.1%), FTSE 100 (1.7%) and the S&P Midcap 400 fell (1.1%).



November 21, 2021

by Rob Zdravevski

rob@karriasset.com.au