Price relationships of….Hot Rolled Coil Steel

Here is an idea to extract from my weekly Macro Extremes publication.

Hot Rolled Coil (HRC) Steel is currently registering an Overbought reading.

Then I overlay the price of a steel producer such as Nucor.

I look for correlation and matching extreme moments, which uncannily appear.

The ellipses in the chart below point to moments when Nucor’s stock price is Overbought on a weekly basis and trading at extreme percentages above its 200 week moving average.

This can spit out a bunch of scenarios such as; a) sell or short Nucor, b) short or sell HRC, c) if you’re a producer you may want to lock in your near/mid term selling prices, d) if you a buyer of steel perhaps hold off doing so as probability suggests you’ll get lower prices or e) don’t chase or initiate a new buy in the equity of steel producers.

Keep in mind, that I’ll compliment this empirical study with some fundamental analysis.

But 2nd and 3rd derivative effects can then move seeing how Hot Rolled Coil Steel prices act against U.S. GDP, government bond yields or the U.S. 5 year inflation break-even rate.

Then you’re off, extrapolating and comparing a load of price relationships to help cross reference your view on the direction of the AUD/USD perhaps.

April 2, 2023

by Rob Zdravevski

rob@karriasset.com.au