Macro Extremes (week ending December 24, 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)

None

Overbought (RSI > 70)

U.S. 2 year bond yields

Turkish 10 year bond yields

the JKM “Japan/Korea (LNG) Marker”

Urea 

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

Dutch TTF Natural Gas (it fell 23% of Friday alone)

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)

Russia’s MOEX equity index

Spain’s IBEX equity index

HSCEI Index

Hang Seng Index

Sugar



Oversold (RSI < 30)

None

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

None



Notes & Ideas:

It was a mild week considering the movements over the past 12 weeks.

There isn’t much to report. 

The past few editions of ‘Macro Extremes’ contains some basics of the framework which I am watching and they are still intact, from Gold, Silver, Currencies and Bonds.

The U.S. 10 year bond yield is still in a downtrend while it holds the 1.34% support line.

From previous week’s commentary, I’ll reiterate watching the difference between the U.S. 10 year bond yield minus the U.S. 2 year bond yield.

The biggest weekly mover in global markets was the Turkish Lira rising 52% following continual weeks of making new historic lows.

Look out for a note on the Baltic Dry Index, which fell a further 7% this week, adding to last week’s 27% decline and it’s part of a story which I am telling is an example of 2nd chance selling pressure which will eventuate in a double dip in many assets.

Another notable mover was (NYMEX traded) U.S. LNG prices, which rose 19% as a flotilla of cargoes are heading to Europe chasing higher spot prices on the continent. 

I’ll continue to highlight the peril of chasing parabolic moves such as the one seen in Dutch TTF Gas price, which after more than doubling in 6 weeks, fell 23% on Friday alone.

While Crude Oil, Gasoil (diesel), U.S. Transports and the S&P 500 all made outside bullish reversal weeks.

The larger advancers over the past week comprised of; 

Oslo +2.3%, Stockholm +3.5%, Philadelphia SOX +4.6%, S&P 500 +2.3%, Transports +3.5%, AUDJPY +2%, AEX +2.4%, CAC +2.3%, DJ Transports +2.3%, IBEX +3%, S&P Midcap 400 +2.6%, Nasdaq 100 +3.2%, Russell 2000 +3.1%, Aluminium +5.8%, Bloomberg Commodity Index +2.6%, WTI Crude +4.3%, Iron Ore +2.2%, Gasoil +1.8%, Lean Hogs +3%, Copper +2.3%, Heating Oil +5%, Cattle 1.8%, LNG +19.5%, Platinum +4.3%, Gasoline +4%, Silver +1.8%, CRB Index +2.6%, Brent Crude +4%, Corn +2.1%, Rice +1.8%, Soybeans +4.1% and Wheat +5.1%.

The group of decliners included ;

Baltic Dry Index (6.8%), Hot Rolled Coil Steel HRC (2%0, JKM (8.5%), Lumber (2.5%), Dutch TTF Gas (3.2%), Rotterdam Coal (2.7%), Bovespa (2.2%) and Istanbul’s BIST (9.5%)



December 27, 2021

by Rob Zdravevski

rob@karriasset.com.au