Macro Extremes (week ending April 7, 2023)

A weekly Macro, Cross Asset review of prices trading at extremes which may generate future investment ideas and opportunities.

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)

SHY (U.S. 1-3 year bond ETF) 

GBP/USD

Overbought (RSI > 70)

Hot Rolled Coil Steel (HRC)

Cattle

Gold (in AUD)

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

Orange Juice

Sugar

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

Copper/Gold Ratio

U.S. 5 year bond yield minus U.S. 5 year inflation break-even rate

Oversold (RSI < 30)

Urea (U.S. Gulf) 

Urea (Middle East)

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

U.S. 5 year bond yield minus U.S. 3 month bond yield

Lithium

Notes & Ideas:

Equities continued with further consolidation with a slight bias towards weakness across most bourses. 

Some may see equites as being range bound for many months now, with may many staying within a 15% range and are still at the same price as June 2022 such as the S&P 500 and Switzerland’s SMI.

The Nasdaq 100 took a break from a 3 week advancing streak by easing 1%, while many small cap indices remain in downward trends.

Amongst bonds, government bond yields generally fell. Many bond yields continue to trade within the boundaries of any extremes but there are some which are getting close to the edge.

Commodities were generally stronger with support seen across the energy complex except for the Gases.

Petroleum energy continued its rebound. WTI Crude has risen 19.4% in 3 weeks while the 3 major Gas commodities contracts continue their declines.

In other notable percentage streaks over the past 2 or 3 weeks, Australian Coking Coal has fallen 19%, Rice has eased 7% while Sugar has soared 13% and Silver has climbed 7.5%.

In currencies, the AUD was weak across all crosses while the EUR strength persists.

The larger advancers over the past week comprised of;

Baltic Dry Index 12.3%, WTI Crude 6.7%, Gasoil 2.3%, Coffee 7.7%, Lumber 3.6%, Orange Juice 2.2%, Gasoline 4.9%, Sugar 6.1%, S&P GSCI 2.6%, Urea U.S. Gulf 6.1%, Brent 6.3%, Silver in AUD 3.8%, Silver in USD 3.6%, Gold in AUD 2.2%, Gold in CAD 1.9%, Gold in USD 2%,CSI 300 1.8% and the FTSE 100 rose 1.4%. 

The group of decliners included;

Australian Coking Coal (14.6%), Aluminium (2.5%), Rotterdam Coal (4.2%), Iron Ore (6.5%), Copper (1.9%), JKM LNG (6.6%), Lithium (13.4%), Natural Gas (9.3%), Nickel (2.3%), Dutch TTF Gas (9.9%), Corn (2.6%), Oats (6.6%), Rice (4.5%), Wheat (2.4%), KBW Bank Index (2%), DJ Transports (3.3%), S&P MidCap 400 (2.6%), Nikkei 225 (1.9%), Stockholm (1.8%), Russell 2000 (2.7%), S&P SmallCap 600 (2.8%), Philadelphia Semiconductor Index (4.9%) and Thailand’s SET Index fell 2%.

April 8, 2023

by Rob Zdravevski

rob@karriasset.com.au