Macro Extremes (week ending August 19, 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)

AUD/GBP (2nd consecutive week)

Nikkei 225

Overbought (RSI > 70)

Dutch TTF Gas

Japan Korean LNG Marker price

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

Istanbul Stock Exchange (BIST)



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

Japanese 10 year government bond yields

U.S. 10 year minus 5 year government yield spread

Oversold (RSI < 30)

U.S. 5 year minus U.S.3 month government bond yield ‘spread’

Hot Rolled Coiled Steel

Tin

Oats

EUR/USD

DKK/USD

KRW/USD

INR/USD

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

Chinese 10 year government bond yields 

Notes & Ideas:

The big news over the past week included; gas and coal prices extending their rise while many other commodities continued to weaken and the surge in the U.S. Dollar, as we saw various currency crosses return to the extreme list.

The larger currency drops occurred in the Kiwi, the Aussie, the Pound Stirling and the Chilean Peso.

We saw a petering of the equity rally amongst small capitalised U.S. stocks. This was timed with my recent notes that this rally ‘may be done’ and one that it to be rented and not owned.

The U.S. yield curve moved out of Oversold territory, moving from last weeks close of 0.42% (the intra-week low was -0.51%) to its current -0.26% level. 

Another notable higher move in yields was the Japanese 10’s rising from 0.16% to 0.19%. I’d count a 21% move as notable.

The Copper /Gold ratio is worth watching a barometer of the health of the economy.

On a weekly basis, we may see the early start of a weaker trend in Gasoline although that’s not confirmed.

Oats fell enough to be Oversold and mean revert to its 200 week moving average.

Lumber have given up two-thirds of last week’s 23% advance.

Sugar had a outside bearish reversal week.

The TAIEX has registered a rare 7 consecutive weekly advance.

The larger advancers over the past week comprised of; 

Australian Coking Coal 9.5%, Rotterdam Coal 5.9%, China Coal 2.5%, U.S. Dollar Index 2.3%, Gasoil 4%, Copper/Gold Ratio 2.9%, Heating Oil 5.2%, JKM KNG9.9%, Natural Gas 6.5%, Cotton 4.6%, Dutch TTF Gas 18.7%, Istanbul BIST 5.1% and Australia’s ASX 200 rose 1.2%. 

The group of decliners included;

Aluminium (2.1%), Baltic Dry Index (13.4%), WTI Crude (1.8%), Gold (2.9%), Lean Hogs (6.9%), Hot Rolled Coil Steel (3.1%), Coffee (4.1%), Lumber (14.6%), Orange Juice (6.2%), Palladium (4%), Platinum (7.4%), Silver (8.5%), Brent Crude (2.1%), Silver in AUD (5.2%), Gold (3.1%), Corn (2.2%), Oats (9.4%), Soybean (3.5%), Wheat (4.3%), AUD/USD (3.4%), EUR/USD (2.2%), GBP/USD (2.5%), NZD/USD (4.3%), CLP/USD (7.9%), KBW Bank Index (2.4%), DAX (1.8%), DJ Transports (2.5%), MIB (1.9%), HSCEI (2%), HSI (2%), Nasdaq 100 (2.4%), Russell 2000 (2.9%), SOX (3.7%), Nasdaq Biotech Index (3.8%) and the Nasdaq Composite fell (2.6%)

August 21 2022

by Rob Zdravevski

rob@karriasset.com.au