Macro Extremes (week ending June 2, 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) either 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)

U.S. 7 year and 20 year government bond yields 

British 2, 3 and 5 year government bond yields

USD/CNH

USD/SEK

Philadelphia Semiconductor Index (SOX)

Overbought (RSI > 70)

U.S. 3 month government bond yield

Russia’s MOEX index

Nasdaq 100

Nikkei 225

USD/ZAR

Uranium 

Cattle

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

Taiwan’s TAEIX Index

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

Australian 10 year minus 2 year bond yields

Greek and Swiss 10 year bond yields

EUR/GBP

China Coal

CSI 300 equity index

Oversold (RSI < 30)

LNG Japan Korea Marker (JKM)

Lithium Hydroxide 

Dutch TTF Gas

Urea (both U.S. Gulf and Middle East prices)

Soybeans

Jakarta equity index

The Oversold Quinella – Both Oversold and Traded at < 2.5 standard deviations below the weekly mean)

Rotterdam delivered Coal

Notes & Ideas:

Equity Indices were generally higher with the U.S. indices being the notable leaders.

As preempted in past weekly commentaries, equities are broadly making recent ‘higher highs’ (as the S&P 500 did this week, traction at 

This price action is adding to the momentum of some but not all, nor are all trends showing particular strength.

Those yet to join the party include the transports, the mid and small caps.

The Nasdaq Composite has strung together 6 consecutive rising weeks (totalling to gains of 12%) while the Nikkei 225’s winning weekly streak has now reached 7. 

Both feature in the Overbought category of this week’s list and are visiting this area for the first time since November 2021 and March 2021, respectively.

The beleaguered U.S. Regional (KRE) Bank Index has recovered 15% since it registere an oversold reading 3 weeks ago.

While China’s CSI 300 equity index makes a visit to that region for the first time in 14 months.

For the week, the ASX 200 fell 0.1% and the ASX Small Caps rose 0.8%.

Government bond yields were mainly lower except for Australia.

Yields declined enough for those British 10 year gilts to no longer be overbought.

TLT (U.S. 20 year bond ETF) isn’t oversold this week as bond yields rose while the U.S. 5 year minus U.S. 5 year inflation break-even rate isn’t at overbought extremes.

Although it is worthy to note the divergence between the bond buyers and those driving equity indices higher.

Brazil yields have been trending lower, having declined from 13.6% to 11.4% over the past 2 months. This remains relevant because Brazil was amongst the first central banks to start their hawkish inflation strategy, being almost a year before any G7 nation did so.

The Australian 10 year minus 2 year bond yield spread registered an oversold reading. This week was its lowest close since October 2010. Preceding that, the same percentage was seen in September 2008. 

The U.S. 3 month yield extended its highest close “in this cycle” at 5.38%. 

The last time one could’ve earned this interest rate was 23 years ago on January 1, 2001.

Commodities were mainly weaker across the broader energy complex offsetting gains seen in livestock and the ‘softs’.

Mimicking last week, Coal, Gas, Shipping rates and Urea were amongst the notable decliners, with the latter sinking 23% over the past 2 weeks.

While JKM LNG broke its 6 week losing streak it remains close at its lowest point in 3 years.

Natural Gas has fallen 17% in the past 2 weeks and is gaining my interest.

Over the past 3 weeks, the Baltic Dry Index has tanked 49% and has mounted a 4 week losing streak.

Sugar is experiencing 5 consecutive weeks of lower closes while Dutch TTF Gas has declined 50% during it 9 week losing streak. Acutely, it has slumped 30% over the past 3 weeks.

Copper bounced off its oversold extremes and Platinum fallen 13% from its high seen in late April 2023. 

In Currencies the AUD firmed while the EUR was weak

The larger advancers over the past week comprised of;

Rotterdam Coal 2%, Lean Hogs 14%, Cattle 5.4%, Lithium 6.3%, Tin 4.9%, Cotton 3.2%, Uranium 2.1%, Rice 3.6%, KBW Bank Index 3.1%, DJ Industrials 2.2%, DJ Transports 1.8%, HSCEI 1.5%, Nasdaq Composite 2%, KOSPI 1.7%, S&P MidCap 400 2.6%, Nasdaq Biotechs 1.9%, Nasdaq 100 1.7%, Nikkei 225 2.1%, Russell 2000 3.3%, S&P SmallCap 600 3.3%, S&P 500 1.8% and the KRE Regional Bank Index climbed 4.8%.

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The group of decliners included;

Australian Coking Coal (2%), Baltic Dry Index (22.6%), China Coal (16.8%), Hot Rolled Coiled Steel (14.5%), Natural Gas (10.1%), Orange Juice (4.1%), Platinum (2.4%), Gasoline (3.5%), Sugar (2.5%), Dutch TTF Gas (5.4%), Urea U.S. Gulf (8%) and Malaysia’s KLSE equity index eased 1.6%.

June 4, 2023

by Rob Zdravevski

rob@karriasset.com.au