Macro Extremes (week ending September 16, 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)

TBT

EUR/GBP

AUD/JPY

Overbought (RSI > 70)

U.S. 2 year government bond yield

German 5 year government bond yields

Spanish, French, Italian and U.K.10 year government bond yield

U.S. Dollar Index (DXY)

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

U.K. 10 year government bond yields

U.S. 5, 20 and 30 year government bond yields

German 2 year government bond yields

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

CAD/USD

NZD/USD

IEI

Oversold (RSI < 30)

Tin

Hot Rolled Coil Steel (HRC)

GBP/USD

JPY/USD

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

CNH/USD

KRW/USD

TLT

Notes & Ideas:

The big news for the week is the outside bearish weeks posted by the Shanghai Composite, the DJIA, DJ Transports, MidCap 400, NDQ, RTY, SOX, S&P 500, the SmallCap 600, Copenhagen’s OMX 30 and the Swiss SMI.

The declines and reversals in equites was preceded by my note, 9 days earlier, that markets can be (are) cruel.

https://robzdravevski.com/2022/09/09/not-trusting-some-of-the-signals/

The Government bond yield continue to gather an ‘overbought’ stream but the US 5 year minus 3 month yield spread is not longer Oversold.

The consensus is that Europe is ‘on the nose’. The CAC and DAX lows were seen six months ago, in March 2022. Those indices are back visiting and testing those lows.

Meanwhile, the Hang Seng Index and HSCEI have made ‘lower lows’, while the S&P 500 made a lower close than last week’s low.

Re-resting of lows in equity indices will be something I’m watching.

This past week, the Russell 2000 mean reverted (200 week moving average) again, the Philadelphia Semiconductor Index (SOX) is close to its 1st visit in a long time, the S&P SmallCap 600 is 5% away from doing so while the ASX 200 is nearly doing so for the 2nd time in as many months.

We saw more in the energy complex accelerate their decline. 

Diesel (Gasoil) fell 10%, the Japan Korean LNG Marker sunk 22%, and Heating Oil declined 11%.

My thoughts about the price of diesel halving were published 2 months ago.

https://robzdravevski.com/2022/07/13/positioning-in-trucking-companies/

The Baltic Dry Index has risen 40% in the past 2 weeks, showing demand for bulk shipping.

And Gold is working its way towards a buy target.

The larger advancers over the past week comprised of; 

Baltic Dry Index 28%, Iron Ore 3%, Lean Hogs 4%, Nickel 9.5%, Orange Juice 1.9%, Platinum 2.8%, Silver in USD 3.3%, Urea Middle East 2.2%, Silver in AUD 5.8% and Soybeans rose 2.6%. 

The group of decliners included;

Australian Coking Coal (2.3%), Rotterdam Coal(1.8%), China Coal (3.6%), WTI Crude (2.3%), Gasoil (10%), Copper (1.4%), Heting Oil (11.4%), HRC (3.6%), JKM (21.8%), Coffee (5.9%), Lumber (5.8%), Natural Gas (2.9%), Palladium (3%), Rubber (1.8%), Sugar (1.9%), CRB (1.9%), Cotton (7.6%), Dutch TTF (9.3%), Uranium (6.9%), Gold in USD (2.5%), Shanghai (4.2%), AEX (3.1%), KBW Banking (3.8%), CAC (2.2%), DAX (2.7%), DIA (4.4%), DJ Transports (8.8%), HSCEI (3.1%), HSI (3.1%), Bovespa (2.7%), S&P MidCap 400 (5.1%), Nasdaq 100 (5.8%), Oslo (2.7%), Copenhagen (6.3%), Helsinki (2%), Stockholm (2.7%), Russell 2000 (4.5%), Sensex (1.6%), SMI (2.7%), SOX (5.8%), S&P 500 (4.7%), FTSE 100 (1.6%), Toronto’s TSX (2%), S&P SmallCap 600 (4.1%), Nasdaq Biotech (3.9%), Nasdaq Composite (5.5%) and the ASX 200  fell 2.3%.

September 18, 2022

by Rob Zdravevski

rob@karriasset.com.au