Macro Extremes (week ending August 25, 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)

German, Swedish, French and Chilean 10 year government bond yields

TBT

LNG

U.S. 20 and 30 year government bond yields

Overbought (RSI > 70)

U.S. 3 month bill yields

Uranium

Oats

CHF/AUD

GBP/JPY

MOEX

And Turkiye’s BIST 100

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)

TLT

Shanghai Composite

Hang Seng

and Stockholm 30 equity index

Oversold (RSI < 30)

Lithium

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

Chinese 10 year government bond yields

Notes & Ideas:

Equities had a mixed week with an overall higher bias.

Thailand’s SET rose 2.7% with he naming of a new Prime Minister.  

The Dow Jones Transports is in a 4 week losing streak as is the KRE Regional Bank Index. The latter having fallen 10% over that time.

While the larger news was that the Nasdaq et al. registered a winning week breaking its 3 week downturn.

The losers appearing on this weeks list are Chinese equities and American banks.

In between, many indices stayed within 1% of the unchanged mark.

For some comparison, the S&P 500 rose 0.8%, the MidCaps fell 0.1%, the Russell 2000  eased 0.3%, the Small Caps declined 0.4%, the U.S. Small Caps Value fell 1.2%, the ASX 200 declined 0.5% while the ASX Smalls Caps squeezed 0.1% higher.

Across the Commodities complex, prices were generally higher,

Sugar had a bullish outside reversal week.

Heating Oil has strung together 9 consecutive winning weeks, advancing 36% over that time.

Agricultural’s were mixed, although Oats soared 9% and into overbought territory.

The Baltic Dry Index gave all of last week’s gains.

And Silver broke its 5 week losing streak by rising 6%.

In currencies, the AUD firmed which was enough to move it out last week’s reported oversold territory.

Albeit by a slight margin, the AUD did extend its weekly losing streak against the USD, the SGD and the Indian Rupee to 6.

Many other currencies are also streaking.

The CAD/USD, the NZD/USD and the EUR/USD are in 6 week losing streaks. The latter appeared in this publication during July 10-17 editions as being overbought, which was the first time the Euro was so since July 2020.

A year earlier, the EUR/USD was trading at 0.9700 and the financial media was hyperventilating about it breaking parity. Funny how things turn when you watch the ‘tape’ rather than absorb noise. 

The USD/DKK and USD/SEK are in the 6 week winning streaks. The opposite applies to the reciprocal currency.

The CHF/AUD broke its 9 week consecutive rising run.

The U.S. Dollar (DXY) has now risen for 6 straight weeks.

And the GBP was weaker. It’s not overbought versus the AUD and it produced a bearish outside reversal week vs the USD and the JPY.

Bond yields fell and intra-week many did not trade higher than the previous weeks high.

I say that bond yield fell…well all but for the U.S. shorter dated 2’s, 5’s and 7’s.

And Chinese 10 year yields are at their lowest close since April 2020.

The larger advancers over the past week comprised of;

Aluminium 1.7%, Rotterdam Coal 5%, Cotton 4.4%, Gasohol 2.9%, Heating Oil 4.6%, Coffee 2.1%, Tin 4.6%, Platinum 3.6%, Gasoline 1.7%, Sugar 4.5%, Silver 6.6%, Silver in AUD 6.5%, Oats 8.7%, Soybean 2.6%, Nasdaq Composite 2.3%, Nasdaq 100 1.7%, SET Index 2.7% and the BIST 100 rose 2.7%.

The group of decliners included;

Baltic Dry Index (12.7%), Hogs (2.7%), Lumber (3.5%), LNG in Yen (7.1%), Orange Juice (2.9%), Palladium (2.5%), Dutch TTF Gas (4.5%), Corn (1.8%), Wheat (2.7%), JKM (3.5%), Shanghai (2.2%), CSI 300 (2%), KBW Bank Index (2.1%) and the KRE Regional Bank Index fell 2.5%.

August 27, 2023

by Rob Zdravevski

rob@karriasset.com.au