Macro Extremes (week ending December 31, 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)

Italian 10 year government bond yields

Soybeans

Rice

Overbought (RSI > 70)

U.S. 2 year bond yields

Cattle

USD/JPY

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

None

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)

EUR/GBP



Oversold (RSI < 30)

None

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

Hot Rolled Coil Steel (HRC)



Notes & Ideas:

Notable news in market action included Urea and the JKM LNG Marker are no longer Overbought.

It was the mildest of weeks not only considering the movements over the past 12 weeks but also the lighter than usual volume which can exacerbate price volatility.

I’m encouraging readers to review 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 biggest weekly mover in global markets was the declines in Coal and Gas related commodity prices. JKM LNG fell 22%, Rotterdam Coal declined 16%, Dutch TTF Gas was walloped 47%, while Hot Rolled Coil (HRC) Steel gave up 11%.

All of these assets are falling following parabolic ascents, which remains something to watch, although HRC Steel is the first commodity to have reached an Oversold level for many months, after ‘only’ declining 26% from its August all-time high.

Interestingly, Dutch TTF Gas has fallen 61% from its parabolic peak and not close to touching an extreme low.

The price of Rice has touched its highest level in 20 months. The previous time it saw this level was mid-2014.

It’s worth pondering the effect of these higher prices for producing and exporting nations along with those countries where Rice is a notable staple.

China and India produce 29% and 23% of the globe’s annual crop, while the latter is the largest exporter.

In other milestones, the Japanese Yen has closed at its weakest price (versus the U.S. Dollar) since March 13, 2017.

More on these topics and their relationship to other assets in separate posts.

And Crude Oil, Gasoil (diesel), U.S. Transports and the S&P 500 all gained, adding to and confirming last week’s bullish outside reversal weeks.

The larger advancers over the past week comprised of; 

Australian Coal 3.1%, Cocoa 1.9%, WTI Crude 1.9%, Gasoil 2.1%, Lumber 9.4%, Cattle 1.9%, Silver 1.8%, Brent Crude 2.7%, Rice 4.5%, Dow Jones Transports 1.8%, IBEX 1.8%, S&P 400 Midcap 1.7%, MOEX 2.3%, Sensex 2.1% and Copenhagen 25 index rose 1.8%.

The group of decliners included ;

Aluminium (2%), Rotterdam Coal (15.5%), China Coal (7.3%), Lean Hogs (2.1%), HRC (11.2%), JKM (21.5%), Coffee (2.2%), LNG Nymex (33.8%), Sugar (1.9%), Dutch TTF Gas (47%), Urea (9.8%), Corn (2.1%), Wheat (5.4%), Oats (3.4%).

Lastly, and editorial comment.

Bitcoin and Ethereum both declined 8% for the week, while they seem to synchronise their weekly movements lately, it seems difficult to consolidate the concept that they can be considered a ‘currency’….but then again, the Turkish Lira did fall 18% for the week and many still call it a currency.



January 2, 2022

by Rob Zdravevski

rob@karriasset.com.au