Macro Extremes (week ending November 10, 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

Swiss 10 year government bond yields 

Coffee

Overbought (RSI > 70)

Turkish 10 year government bond yields 

USD/JPY

Uranium 

And Rubber

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

Cocoa

EUR/JPY

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

Cotton

Coffee

Cattle

Newcastle Coal

Platinum 

Oats 

AUD/JPY

Oversold (RSI < 30)

Lithium Hydroxide

Nickel 

JPY/USD

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

Palladium

JPY/EUR

Notes & Ideas:

Government bond yields were mixed. The European and U.S. government bond yields were higher, although on a week to week closing basis, the advance wasn’t as much as the financial media would’ve led you to believe.

Furthermore, the U.S. bond yields still aren’t as high as those seen 3 or 4 weeks ago, which is evident in the 30 yer bond yield, which were actually lower this week.

Australian yields were flat to lower. Short duration British yields were lower.

Japanese bond yields fell and took a break from being overbought. 

In fact, readers may find it interesting to look back the past 4-5 editions of ‘Macro Extremes’ to note those bond yields which were overbought then…..and are no longer so, today.

And I need to look at the U.S. 10 year minus German 10 year yield spread as it’s nearing overbought territory.

Equities were subdued and mixed, with a slight bias for weakness.

The ones that bucked the weakness appear below mainly led by the Nasdaq.

The ASX 200 closed unchanged. Technically, it fell 0.02%.

The largest advancers for the week are listed at the end of this note.

And, all of the indices which appeared as oversold in the past week’s, are no longer so. 

Commodities were weaker, again. 

The weakness amongst energy contracts (for the 3rd consecutive week) weighed heavily on commodity indices. 

WTI Crude has closed at its lowest point since late July 2023. It has fallen 13% over the past 3 weeks.

Heating Oil is in a 4 week losing streak and has declined 16% in the past 4 weeks.

Gasoline was flat for the week although it’s interesting to note its 25% slump since August 2023.

Natural Gas fell 14% this week and as a result isn’t overbought.

This week sees Cotton, Coffee and Cattle return to being oversold.

Baltic Dry Index rallied 12%, making up half of the past fortnights decline.

Uranium remains overbought for an 13th consecutive week.

while Lithium Hydroxide declining streak extends to 18 consecutive weeks.

It looks like a change of trend approaching for the price of Corn.

Precious Metals are in a downdraft with Palladium and Platinum getting a hiding.

And I reflected on the recent overbought nature of Canadian Dollar priced Gold.

Amongst currencies, the Australian Dollar was weaker while the U.S. Dollar and Euro we’re stronger.

The AUD/EUR had an outside bearish week as did the AUD/IDR.

The BRL/USD fell a mere 0.10%, taking a break from its 4 week rising streak.

And as pre-empted in last week’s edition, the Japanese Yen is now registering extremes against the USD and the Euro.

The larger advancers over the past week comprised of;

Baltic Dry Index 12.4%, Cocoa 3%, Hot Rolled Coil Steel 2.3%, Tin 2.8%, Newcastle Coal 3%, Orange Juice 6.4%, Rice 5.6%, Bovespa 2%, Nasdaq Composite 2.4%, KOSPI 1.7%, Nasdaq 100 2.9%, Nikkei 225 1.9%, SOX 4% and the S&P 500 rose 1.3%.

The group of decliners included;

Australian Coking Coal (4.6%), Aluminium (1.8%), Bloomberg Commodity Index (3.4%), China Coking Coal (7.2%), WTI Crude (4.2%), Cotton (2.9%), Gasoil (10.7%), Copper (2.6%), Heating Oil (6.2%), Cattle (5.3%), Natural Gas (13.7%),  Palladium (13.3%), Platinum (10.5%), Sugar (1.7%), S&P GSCI (3.4%), CRB Index (3%), Dutch TTF Gas (3%), Brent Crude (4.1%), Silver in AUD (1.8%), Silver in USD (4.1%), Gold in CAD (1.7%), Gold in USD (2.7%), Corn (2.8%), Oats (6.8%), JKM LNG (2.2%), KBW Banking Index (2.1%), HSCEI (2.5%), Hang Seng (2.6%), S&P SmallCap 600 (3%), KRE Regional Bank Index (5.2%), S&P MidCap 400 (1.6%), Nasdaq Biotechs (4.3%), Russel 2000 (3.1%), SET (2.1%) and the S&P SmallCap Value Index fell 3.5%.

November 12, 2023

by Rob Zdravevski

rob@karriasset.com.au