Macro Extremes (week ending September 15, 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)

Australian Coking Coal

Oslo’s equity index

Overbought (RSI > 70)

Turkish and Russian 10 year government bond yields

U.S. 3 month bill yields

Cocoa

Cattle

Rubber

Russia’s MOEX

India’s Nifty

And Turkiye’s BIST 100

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

Uranium

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

Mexico and Copenhagen’s equity index

Oversold (RSI < 30)

U.S. Mid West Hot Rolled Coil Steel

Lithium Hydroxide

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

None

Notes & Ideas:

Government bond yields rose modestly, extending last week’s move.

However, they have mostly traded sideways for several months, failing to make new highs.

The exception is in the Japanese 10’s. The U.S. 10’s are close to doing so.

Equity indices had a good week, particulate those in Europe and Asia.

Although the major U.S. indices were subdued. The Dow Jones Industrials, Russell 200 and S&P 500 declined 0.2% for the week. The Nasdaq Composite, MidCap 400 and Nasdaq 100 fell 0.5%. The Small Cap 600 rose 0.2%.

Positively, the KOSPI, Nikkei 225, TAIEX, Singapore’s Strait Times and Chile all posted bullish outside reversal weeks.

The latter broke its 6 week losing streak.

Inversely, Istanbul’s BIST 100 performed an bearish outside reversal week

The ASX 200 recovered all of last week’s decline.

And the Philadelphia Semiconductor Index was down 2.5% for the week, mainly due to Friday’s 3% drop.

Commodities were mainly firmer with energy prices continue to have a starring role.

For example, Brent Crude has risen 10 of the past 12 weeks, climbing 27% over that time.

While U.S. Mid West Hot Rolled Coiled Steel has been oversold for 3 weeks and has fallen 40% since mid April 2023.

The Baltic Dry Index has soared 27% in the past fortnight.

Agricultural’s were mainly weaker.

Australian Coking Coal and Uranium have risen 32% and 19% respectively during their 10 week winning streaks.

Cocoa is at a 46 year high and in a 5 week winning streak.

Rubber has risen for 6 consecutive weeks. Sugar has climbed for its 4th week.

Inversely, Lithium Hydroxide has fallen for 11 consecutive weeks.

While Iron Ore and AUD Gold broke their respective 6 and 4 week winning streaks.

And the Gold Volatility Index closed at its lowest level since December 2019.

Amongst currencies, the AUD and the Canadian Loonie were stronger this week. As such, their own strength rendered the AUD/CAD pair flat for the week.

The U.S. Dollar (DXY Index) is in a 9 week winning streak.

The GBP/JPY isn’t overbought this week and the CNH/USD is no longer oversold.

The JPY/USD is nearing oversold levels whilst the THB/USD is at its lowest level since November 2022.

The EUR/USD weakness extends to its 9th consecutive week as does the DKK/USD.

Past editions made mention of the strength in the CHF/AUD. It has now eased lower from those highs.

And the NZD/AUD had a bearish outside reversal week.

The larger advancers over the past week comprised of;

Australian Coking Coal 7%, Rotterdam Coal 4.6%, Baltic Dry Index 16.4%, Cocoa 2.8%, China Coking Coal 7%, WTI Crude 3.7%, Lean Hogs 2%, Copper 2.3%, Heating Oil 2.6%, Coffee 7.1%, Cattle 2%, Newcastle Coal 2.9%, Palladium 5.1%, Platinum 3.9%, Sugar 2.3%, Natural Gas 1.5%, S&P GSCI 1.8%, CRB Index 1.8%, Dutch TTF Gas 5.7%, Brent Crude 4.2%, Uranium 6.8%, JKM 8.6%, KBW Banks 2.4%, CAC 1.9%, MIB 2.4%, IBEX 2%, BOVESPA 3%, KOSPI 2.1%, Nikkei 225 2.8%, NIFTY 1.9%, Oslo 2.7%, Helsinki 1.8%, SMI 2.3%, STI 2.3%, TAIEX 2.1%, TSX 2.7%, FTSE 100 3.1%, Chile 2.1%, ASX 200 1.7% and the ASX Materials Index climbed 3.9%.

The group of decliners included;

HRC Steel (2.2%), Lithium (2.2%), Tin (3%), Corn (1.6%), Oats (4.2%), Soybeans (1.7%), SOX (2.5%), BIST 100 (3.7%) and Mexico IPC Index fell 2.2%. 

September 17, 2023

by Rob Zdravevski

rob@karriasset.com.au