Macro Extremes (week ending June 24, 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)

None

Overbought (RSI > 70)

Australian 2 & 3 year government bond yields

U.S. 2 and 5 year government bond yields

Canadian, Swiss, German, Spanish, French, Italian, Korean and Portuguese 10 year government bond year yields

TBT & TLT

USD/JPY

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

None

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

Copper

Copper/Gold Ratio

Oats

Soybeans

S&P MidCap 400 and SmallCap 600

SMI

Toronto’s TSX

ASX 200 



Oversold (RSI < 30)

JPY/USD

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

South Korean KOSPI Index

Chilean Peso / U.S. Dollar

Bitcoin and Ethereum (also touching their 200 week moving average) 

Notes & Ideas:

This week’s biggest news was the rally in stocks, the pullback bond yields and all the currencies moved from away from their extremes.

As I reflect on the most recent editions of this periodical, both of these asset classes were and have spent time at the ‘extreme’s.

The crescendo of a surging yield Japanese 10 year yield of 2 weeks ago, peaking at 0.45% seems more pointed now they at 0.22%. This decline aligned with one of many signals of a rally in equities.

Another interest rate and market indictor to watch is the Copper/Gold Ratio, which I’ve written about previously. It also touched its 200 week moving average this past week.

The U.S. Dollar Index isn’t Overbought, nor the Australian 5 and 10 year bond yields, Germany’s 2 & 5’s or the U.S. 10’s.

The US 10 year minus Australian 10 year yield is no longer Oversold, nor is the GBP/USD, the Korean Won or the S&P 500.

Last week we had a hint of a rise in stocks as the Nasdaq rose amongst a list of losers and I wrote “The U.S. biotech index closed up 0.06%. Perhaps some rotational resilience for a bludgeoned sector”.

The Nasdaq Composite rose 7.5% while the Biotech Index soared 9.7%……for the week.

Natural Gas continued is decline (down 32% in 2 weeks) while LNG prices added to the previous weeks gains.

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

Tin declined 10%, adding to last week’s fall of 12.8% and the relevance of this note, its down 40% since its Overbought Quinella on March 7th, 2022 edition of this note

Cotton slipped 25% for the week. Why? Is it speculators realised that’s replenishable?

Perhaps the same realisation occurred in the Oats, Corn, Wheat and Soybean market last week?

Unsurprisingly, the Bloomberg Commodity Index is down 11% in 3 weeks, while Oil didn’t contribute to any of this decline for it only fell 0.6% for the week, following last week’s 10% slump.

Nor did Gold, as it only fell 0.6%, but then again Gold has been acting strangely for many months.

The larger advancers over the past week comprised of; 

JKM 9.3%, Lumber 1.9%, LNG 6.4%, Palladium 3.1%, Gasoline 2.4%, Dutch TTF Gas 9.1%, Uranium 1.4%, AEX 3.9%, KBW Banking Index 4.5%, CAC 3.2%, CSI 300 2%, Dow Jones Industrial 5.5%, DJ Transports 5.3%, MIB 1.6%, HSCEI 3.6%, HSI 3.1%, Midcap 400 4.6%, Nasdaq 100 3.5%, Nikkei 2%, Sensex 2.7%, OMX 5.2%, Russell 2000 6%, SMI 3.6%, SOX 5.4%, S&P 500 6.5%, FTSE 2.7%, S&P SmallCap 600 4.7%, Biotechnology Index 9.7%, Nasdaq Composite 7.5%, ASX 200 1.6% and commodity heavy TSX rose only 0.6%.

The group of decliners included;

Aluminium (1.9%), Bloomberg Commodity Index (4.3%), Australian Coal (2.2%), Baltic Dry Index (9.6%), China Coal (8.7%), Iron Ore (2.2%), Copper (6.8%), Coffee (1.8%), Natural Gas (10.4%), Cattle (2%), Tin (10.4%), Nickel (2.5%), Orange Juice 6.7%, Platinum (2.9%), CRB Index (3.4%), Cotton (25.3%), Silver in AUD (2.6%), Silver (2.5%), Corn (4.4%), Oats (19.8%), Soybeans (6.3%), Wheat (10.5%), KOSPI (3.1%), OBX (2.9%), HEX (2%), STO (1%) and Taiwan’s TAEIX (2.2%).

June 26, 2022

by Rob Zdravevski

rob@karriasset.com.au