Macro Extremes (week ending July 22, 2022)
July 24, 2022 Leave a comment
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)
AUD/GBP
Overbought (RSI > 70)
Brazil 10 year government bond yields
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)
U.S. 10 year minus U.S. 5 year government bond yield
Gold in AUD
Corn
Oversold (RSI < 30)
Hot Rolled Coiled Steel
Copper
Tin
Silver (in USD)
Silver (in AUD)
INR/USD
JPY/USD
KRW/USD
IDR/USD
The Oversold Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)
None
Notes & Ideas:
This past week’s biggest news was the rally in equities, the decline in the USD and the continued decline in agricultural and energy commodities.
Wheat has fallen 40% over the past 2 months and is now at its lowest close since January 10, 2022 which is well below the price when Russia invaded Ukraine.
While Corn is at its lowest price since November 8, 2021.
Other mean reversion being seen in Gasoil is on its way. It fell 4% for the week even following a 4% rebound on Friday alone. This diesel fuel was mentioned in this recent post.
Bonds caught a bid and saw yields fall, as they move back to some ‘normalisation’.
The IEF and TLT bond ETF’s rose 1.4% and 2.1%. Quite a good weekly result of a government bond fund.
The U.S. yield curve remains inverted for the 4th week in a row and Oversold for 2 consecutive weeks while the U.S. 5 year minus 3 month yield spread hit my Oversold Trifecta.
In equities, I’m reflecting on my previous comments pondering ‘what if the lows (in equities) have already been seen”?
Past posts have highlighted the extreme lows seen in various U.S. indices such as the Russell 2000, the Smallcap 600, S&P 500 and the Nasdaq. Since their June 16, 2022 intra-day lows, these indices have risen between 10% and 12%.
On June 7, 2022, I suggested that Natural Gas was trading at the mother of all peaks’.
It fell 34% from $9.45 to $6.22 within 14 days. The post below prompted the closing of that position and taking the ‘fat part of the trade’. That was on June 26, 2022.
This past week, Natural Gas rose 18% and it is now 33% higher in the past month.
There is indeed merit in taking the ‘fat part of the trade’.
Today, it’s no mans land and I don’t see a trade.
We saw a weakening in a persistently strong USD.
The Aussie rallied 2% agains the USD.
The hoo-ha about the Euro touching parity didn’t actually mean much. EUR/USD is at 1.02 today.
The Copper/Gold Ratio bounced out of Oversold territory, nor is the GBP/USD or the SEK which rallied 2.5% against the USD.
The Yen remains weak and the Indian Rupeee and Chilean Peso are trading at all-time lows.
Crude posted its lowest weekly close since the Ukraine invasion, which is 5 months to the day.
Recents posts about bourses in Taiwan, South Korea and Germany being Oversold saw the corrective action with 3% rallies.
And last week, I wrote about Gold and Silver nearing their Oversold regions and Silver in AUD at $26.50 would be an interesting entry point. It’s low for the week was $26.54.
The larger advancers over the past week comprised of;
Aluminium 4.3%, Bloomberg Commodity Index 2.7%, Hogs 4%, Copper 3.6%, JKM LNG 7.5%, Coffee 3.5%, Cattle 1.8%, Natural Gas 18.3%, Palladium 10.4%, Platinum 4.4%, Cotton 3.1%, Brent Crude 2.8%, Rice 2.1%, AEX 4.9%, KBW Banking Index 2.1%, CAC 3%, DAX 3%, Dow Jones Industrials 2%, DJ Transports 4.5%, HSCEI 2.1%, Bovespa 2.5%, KOSPI 2.7%, S&P Midcap 400 4%, Nasdaq 100 3.5%, Nikkei 4.2%, Sensex 4.3%, Oslo 3.8%, Copenhagen 4.2%, Helsinki 2.7%, Stockholm 4%, Russell 2000 3.6%, Philadelphia Semiconductor Index 5.5%, S&P 500 2.6%, Singapore STI 2.7%, TAIEX 2.7%, Nasdaq Transports 5.1%, ASX 200 2.8%, Toronto’s TSX 3.2%, S&P Smallcap 600 4.2%, Nasdaq Composite 3.3%.
The group of decliners included;
Rotterdam Coal (2.3%), WTI Crude Oil (3%), Gasoil (4%), Heating Oil (6.6%), LNG (6.6%), Tin (2.1%), Sugar (7.1%), Urea (2.1%), Silver in AUD (2.4%), Corn 6.6%, Oats (2.9%), Soybeans (3%), Wheat (2.3%) and the Nasdaq Biotechnology Index fell 1.6%.
July 24, 2022
by Rob Zdravevski
rob@karriasset.com.au
rob zdravevski's blog 