Macro Extremes (week ending January 7, 2022)

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

U.S. 10 year government bond yields

Japanese 10 year yields

USD/JPY

Soybeans

Dow Jones Industrial Average

Stockholm 30 Index

Taiwan’s TAEIX equity index

Overbought (RSI > 70)

U.S. 2 and 5 year bond yields

Coffee

Lumber

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

Sugar

Oversold (RSI < 30)

Hot Rolled Coil Steel (HRC)

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

None



Notes & Ideas:

The big news in global markets was the surge in government bond yields.

The yield in German 10 year bonds moved from (0.18%) to (0.04%). 3 weeks these yields rose from a low of (0.38%). Equally, French ’10’s’ soared from (0.03%) to 0.28%.

While Japanese 10 year bond yields doubled from 0.07% to 0.14%.

I want to emphasise the fact that rates amongst many government bond yields have doubled over the pat week or three. The quantum of ‘doubling’ is worthy of note.

In other news, U.S. equity indices were the obvious losers, except for the U.S. Banks which make more money when interest rates rise. Meanwhile, the energy commodity complex lead the advancers.

The Japanese Yen traded at its weakest price (versus the U.S. Dollar) since January 9, 2017.

Lastly, Platinum and Gold registered Bearish Outside Reversal Week and the Nasdaq entered a new weekly downward trend.   

The larger advancers over the past week comprised of; 

Aluminium 4.8%, Australian Coal 7.7%, Rotterdam Coal 16.8%, Bloomberg Commodity Index 2.1%, Baltic Dry Index 3.2%, China Coal 4.9%, WTI Crude 4.9%, Gasoil 6.8%, Heating Oil 6.5%, JKM 11.3%, Coffee 5.5%, Lumber 7.4%, Natural Gas 5%, Gasoline 3.3%, CRB Index 2.4%, Dutch TTF Gas 25.4%, Brent Crude 5%, Uranium 8.6%, Corn 2.3%, Soybeans 5.3%, KBW Banking Index 10%, Singapore’s STI 2.6% and India’s Sensex rose 2.6%

The group of decliners included ;

Gold (1.8%), Hogs (2.2%), Cattle (1.7%), Sugar (4.4%), Silver (4%), Wheat (1.6%), Oats (2.2%), Shanghai Composite (1.7%), China CSI 300 (2.4%), Bovespa (2%), S&P 400 MidCap (1.8%), Nasdaq 100 (4.5%), Copenhagen 25 Index (5%), Russell 2000 (2.9%), SOX (3.8%) and the S&P 500 declined (1.9%) 



January 9, 2022

by Rob Zdravevski

rob@karriasset.com.au