Macro Extremes (week ending February 18, 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)

German 5 & 10 year government bond yields

U.S., Japanese & Portuguese 10 year government bond yields

KBW Banking Index

Gold (in AUD)

Overbought (RSI > 70)

Australian 2, 3 and 5 year government bond yields

U.S 2 & 5 year government bond yields

Korean, Russian and New Zealand 10 year government bond yields

CRB Index

Bloomberg Commodity Index

Australian Coal

Aluminium

Tin

WTI Crude

Cattle

Soybeans

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

Australian 10 year government bond yields

Spanish, French, Greek & Italian 10 year government bond yields

Lean Hogs

And Singapore’s Strait Times Index (for 2 consecutive weeks)

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)

CSI 300

Helsinki OMX 25

Oversold (RSI < 30)

U.S. 10 year minus 2 year government bond yield spread

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 is the careering of short duration bond yields into the stratosphere. Government 2 and 3 year bonds are now where 10 year bonds were yielding only 5 months (October 2021) ago.

After 6, 7 or 8 consecutive rising weeks, streaks come to an end and that was the case for many energy prices.

As was the case for last week’s overstretched prices in Coffee & Cotton.

Incidentally, Gasoline, Heating Oil and forward contracts in WTI Crude made bearish outside reversal weeks.

There is merit in referring back to the previous few weeks editions of ‘Marco Extremes’ to remind you of the relevance of the watching for the swings in the pendulum.

The larger advancers over the past week comprised of; 

Gold 3.1%, Hogs 20.9%, Natural Gas 12.4%, Nickel 2.5%, Palladium 6.6%, Platinum 5.7%, Silver 2.7% and Gold in AUD rose 2.1%.

The group of decliners included ;

Rotterdam Coal (2.9%), Cocoa (6.1%), WTI Crude (3.1%), Gasoil (1.9%), Heating Oil (4.5%), JKM (3.1%), Coffee (2.4%), Lumber (3.5%), Gasoline (2.5%), Cotton (3.3%), Dutch TTF Gas (4.7%), Oats (8.4%), KBW Banking Index (3%), AEX (2.2%), DAX (2.5%), Dow Jones Industrial (1.8%), Milano MIB (1.7%), HSCEI (2.8%), Hang Seng (2.3%), IBEX (2.4%), MOEX (4.3%), Nasdaq 100 (1.7%), Nikkei 225 (2.1%), Oslo (2%), Copenhagen (2.8%), Helsinki (2.9%), Stockholm (4.2%), Swiss SMI (1.8%), FTSE 100 (1.9%) and the S&P 500 fell 1.6% (having fallen 3.4% in the past 2 weeks.

February 20, 2022

by Rob Zdravevski

rob@karriasset.com.au