Macro Extremes (week ending August 11, 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)

TBT

U.S. Government 30 year bond yields

Cotton

Gasoil

Heating Oil

Overbought (RSI > 70)

Russian 10 year government bond yields

U.S. 3 month bill yields

Russia’s MOEX

Turkiye’s BIST 100

And Chile’s IPSA equity index

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

None

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

Lithium

Newcastle Coal

AUD/GBP

JPY/GBP

AUD/CHF

Oversold (RSI < 30)

CLP/USD

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

None 

Notes & Ideas:

Equities mostly fell, albeit slightly compounding to last week’s weakness.

I say slightly, for only a few fell more than the 2% requisite to qualify for an appearance in the ‘largest’ decliners list.

The only indices to rise were the Nordics, Toronto’s TSX and the ASX 200.

All while Istanbul’s BIST 100 carries into its 8th consecutive week of gains, piling on gains of 9% in the past fortnight.

Commodities were mixed.

Gases and Coal were the winners while Agricultural’s and some metals were amongst the losers.

Equally, the S&P GSCI had the same sort of week (following a 5th winning a week) while Palladium saw a bullish version.

Cocoa performed an outside bearish reversal week as its breaks a 9 week winning streak 

Lean Hogs mean reverted.

In currencies, the AUD was weak everywhere and is in its 4th week of losses versus the USD.

The AUD/EUR and the AUD/GBP pairs saw their lowest closing prices since May 2020 and April 2020 respectively.

Many currency pairs streaks are into their 4th weeks on either side such as the DXY Index and the EUR/AUD is its 8th consecutive winning week.

Nd the EUR/JPY closed at its highest level since August 2008.

Bond yields rose meaning bonds were being sold off contradictory to the risk-off stance seen in equities.

Although, none of the yields made new highs.

The Australian 5 year bond yield had an outside bullish week as did the Swiss 10’s, the German 10’s and U.K. 5;s.

And the Aussie 10 year spread minus 5 year spread spent its 6th week in oversold territory.

The larger advancers over the past week comprised of;

Australian Coking Coal 2.2%, Rotterdam Coal 7.6%, China Coking Coal 2.1%, Cotton 4.3%, LNG 10%, Natural Gas 7.5%, Palladium 3.5%, Gasoline 6.5%, Sugar 2.7%, Dutch TTF Gas 22.3%, MOEX 2.1% and Istanbul’s BIST rose 4.2%

The group of decliners included;

Cocoa (4.4%), Lean Hogs (2.1%), Copper (3.3%), Coffee (2.3%), Lithium (2.7%), Newcastle Coal (2.2%), Nickel (3.1%), Silver (4.1%), Urea Gulf (4.3%), Silver in AUD (2.9%), Corn (2%),Soybeans (1.9%), Shanghai (3%), CSI 300 (3.4%), HSCEI (2.9%), Hang Seng (2.4%), Nasdaq Composite (1.9%) and the Philadelphia Semiconductor Index (SOX) fell 5%.

For some comparison, the KRE Regional Bank Index fell 1.6%, S&P 600 SmallCap Index declined 1.3%, the Nasdaq 100 retreated 1.6%, the S&P 500 eased 0.3%, the Russel 2000 and the Nasdaq 100 both waned 1.6%.

August 13, 2023

by Rob Zdravevski

rob@karriasset.com.au

Happy Birthday Luca….love from Dad