Macro Extremes (week ending September 23, 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)

Australian 3 year government bond yield

U.S. 10 year minus Australian 10 year bond yield spread

Overbought (RSI > 70)

Greek, Spanish, Portuguese, 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.S. Dollar Index (DXY)

Australian 2 year government bond yield

U.S. 2. 5, 10, 20 and 30 year government bond yields

German 2, 5 & 10 year government bond yields

French, U.K., Korean and Swedish 10 year government bond yields

TBT & TBX

AUD/GBP

EUR/GBP

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

U.S. 10 yes minus U.S. 5 year bond yield

AUD/USD

CAD/USD

Copenhagen and Helsinki equity bourses

Oversold (RSI < 30)

Tin

Hot Rolled Coil Steel (HRC)

EUR/USD

DKK/USD

JPY/USD

Taiwan’s TAIEX and H.K.’s Hang Seng equity indices

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

GBP/USD

KRW/USD

NZD/USD

SEK/USD

SGD/AUD

IEF, IEI & TLT

Switzerland’s SMI equity index

Notes & Ideas:

The big news for the week is broad.

Government bond yields reached extreme peaks with all of the major U.S. durations doing so.

The CRB (commodities) Index fell 4%.

Equity bourse declined between 4% – 7%.

The fall in equities honoured the preceding weeks observation about Bearish Outside Reversals.

The S&P MidCap 400 and SmallCap 600 have fallen 11% in the past 2 weeks. I had warned that the markets were about to play a cruel trick on those who believed in the previous rally.

A couple bourses went into Oversold territory and TAEIX has done it for the 2nd time within 3 months.

While many bourses complete their mean reversion to their 200 week moving average, such as Copenhagen, CAC, S&P Midcap 400, the SOX……the ASX 200 and Nasdaq Composite have double dipped to their 200 WMA.

The S&P 500 is 108 points (or 3%) away from visiting its 200 WMA. The Nasdaq 100 is 153 points or 1.4% above its 200 WMA.  That’s something to watch for this coming week. 

Chinese and H.K. indices continued to make lower lows with the Hang Seng (HSI) ‘going’ oversold.

Currencies continue to be in the news, in particular the strength of the U.S. Dollar and the corresponding weakness in others.

The Aussie divergence continues as cited in this post.

https://robzdravevski.com/2022/09/22/the-aud-usd-is-nearing-a-low/

During the week, the AUD rose 2.5% against the GBP, while it fell 2.5% versus the USD.

The AUD/USD is also very close to my target price. 

Oil continues to decline and close in on my lower target levels

As preempted in earlier posts, Natural Gas and LNG prices continues to decline.

Gold is nearing my Buy target

Price action in uranium is suggest a development of a new trend.

And the Baltic Dry Index has risen 50% in the past 3 weeks, showing demand for bulk shipping.

The larger advancers over the past week comprised of; 

Baltic Dry Index 10%, China Coal 3.8%, Gasoil 5.6%, Heating Oil 2%, Coffee 2.5%, Nickel 3.7%, Orange Juice 6.1%, Sugar 2.2%, Wheat 2.4% and Brazil’s BOVESPA rose 2.2%

The group of decliners included;

Rotterdam Coal(2.2%), Bloomberg Commodity Index (3.9%), Coca (4.8%), WTI Crude (7.1%), Gold (1.9%), Lean Hogs (4.4%), Copper (4.9%), JKM (10.9%), Lumber (9.6%), Natural Gas (12.1%), Platinum (5.3%), Palladium (1.9%), Rubber (2%), CRB Index (3.7%), Cotton (8.6%), Urea (2.7%), Brent Crude (5.3%), Silver (3.6%), Rice (2.5%), AEX (3.8%), KBW Banks (6.8%), CAXC (2.6%), CSI 300 (2%), DAX (3.6%), Dow Jone Industrials (4%), DJ Transports (5.4%), HSCEI (4.8%), HSI (4.4%), IBEX (5%), MOEX (14.2%), KOSPI (2.1%), Midcap 400 (5.9%), Nasdaq 100 (4.6%), Nasdaq Composite (5.1%), Copenhagen (5.7%), Helsinki (4.6%), Stockholm (3.4%), Russell 2000 (6.6%), SMI (4.5%), SOX (6%), S&P 500 (4.7%), TAIEX (3%), FTSE 100 (3%), Canada’s TSX (4.7%), SmallCap 600 (5.9%), Nasdaq Biotech (5.9%) and Australia’s ASX 200 declined 2.4%.

September 25, 2022

by Rob Zdravevski

rob@karriasset.com.au