Macro Extremes (week ending June 17, 2022)

The following assets (on a weekly timeframe) registered an Overbought or Oversold reading and/or have traded more than 2.5 standard deviations above or below its rolling mean.

Extremes “above” the Mean (at least 2.5 standard deviations)

Chinese 10 year Government Bond Yields

EUR/GBP

Dow Jones Industrial Average

Copenhagen’s OMX 25 Index

Philadelphia Semiconductor (SOX) Index

Singapore’s Strait Times Index

Nasdaq Transports Index

Overbought (RSI > 70)

Australian 2, 3, 5 & 10 year government bond yields

TBT & TBX

U.S. Dollar (DXY) Index

USD/JPY

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

U.S. 2, 5 & 10 year government bond yields

British, Canadian, Swiss, Spanish, French, Greek, Italian & Japanese 10 year government bond year yields

German 2, 5 & 10 year government bond yields

Extremes “below” the Mean (at least 2.5 standard deviations)

Copper/Gold Ratio



Oversold (RSI < 30)

CAD/USD

JPY/USD

KRW/USD

GBP/USD

IDR/USD

TLT & IEF

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

US 10 year minus Australia 10 year government bond yields

Bitcoin and GBTC

Amsterdam’s AEX

S&P Midcap 400

Russell 2000

SMI

S&P 500

ASX 200

Toronto’s TSX

KOSPI

And the S&P 500 Small Cap 600

Notes & Ideas:

This week’s biggest news was seeing government bond yields register my Overbought Quinella of registering a weekly RSI above 70 and trading to 2.5 standard deviations above its weekly mean.

The Japanese 10 year yield surged into what seems like a crescendo of 0.45%. It settled the week at 0.40%.

In fact, we saw many surges intra-week in bond yields. The U.S. 10 year touched a high of 3.50% to then close the week at 3.23%.

A more notable observation in this bond yield surge is that the listed bond ETF’s which represent the long and short of the bond market (they carry the codes of IEF, TLT, TBT and TBX respectively) traded to Monthly Quinella’s of extremes. 

Another group in that category, but on the Oversold side of the ‘extremes’ are a host of equity indices.

BUT, can you believe in a week of carnage amongst equites, the Nasdaq 100 rose 1.2% for the week. Incidentally, the Nasdaq Composite fell 4.7%.

Is there some support and strength in the ‘leaders’?

We also saw outside bearish reversal weeks from assets and securities such as the Bloomberg Commodities Index and WTI Crude Oil. These are some of the names which were Overbought over the past couple weeks.

In price action news, I expect Lean Hogs to trade up to $120 and the S&P Midcap 400 closed on its weekly lows, unlike the U.S. 10 year bond yield.

(i.e. Monday may offer a good opportunity to get set)

The U.S. biotech index closed up 0.06%. Perhaps some rotational resilience for a bludgeoned sector.

And finally, Energy isn’t overbought anymore as Oil and Natural Gas tanked following weeks being Overbought.

Natural Gas has fallen 27% since my “Sell” call 11 days ago at $9.50, where I called it the ‘mother of all peaks’.

It’s now $6.95

While, the other Gas (LNG) spiked 46% for the week.

Readers may find referencing my previous 2-4 editions “Macro Extremes” useful, as comments within are still relevant.

The larger advancers over the past week comprised of; 

Australian Coal 2.5%, Rotterdam Coal 5.5%, Baltic Dry Index 11.1%, Gasoil 1%, Hogs 3%, JKM 46.6%, Lumber 2.5%, Dutch TTF 42.8%, oats 2%, Rice 2.2%, Shanghai Composite 1%, CSI 300 1.7%, Nasdaq 100 1.2%.

The group of decliners included;

Aluminium (6.7%), Bloomberg Commodity Index (6.4%), WTI Crude (10.5), Gold (1.9%), Copper (6.5%), HRC (2.9%), Tin (12.8%), Natural Gas (21.5%), Nickel (6.2%), Palladium (5.7%), Platinum (4.2%), Gasoline (9.1%), Silver (1.6%), CRB Index (5.1%), Brent Crude Oil (7.1%), Uranium (7.4%), Soybeans (7.1%), Wheat (2.2%), Urea (2.8%), Bitcoin (27.5%), Ethereum (30%), AEX (6.8%), KBW Banking Index (4.6%), CAC (4.9%), DAX (4.6%), Dow Jones Industrial Average (5%), DJ Transports (3.7%), MIB (3.4%), HSCEI (3.2%), Hang Seng (3.4%), IBEX (2.9%), Bovespa (5.4%), S&P Midcap 400 (7.8%), Nasdaq Composite (4.6%),  Nikkei (6.7%), Sensex (5.4%), Oslo (3%), Copenhagen (5.8%), Helsinki (3.6%), Stockholm (5.4%), SMI (5.7%), SOX (9%), S&P 500 (6.1%), STI (2.6%), S&P Midcap 600 (7.8%), TAIEX (5%), Nasdaq Transports (6.2%), FTSE 100 (4.1%), TSX (6.6%), Russell 2000 (7.5%), S&P Smallcap 600 (7.9%) and Australia’s ASX 200 fell 6.6% (adding to last week’s 4.2% decline.

As you can see, there wasn’t may many places to hide.

June 18, 2022

by Rob Zdravevski

rob@karriasset.com.au  

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