Macro Extremes (week ending January 26, 2024)

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

Lean Hogs

KLSE – the Kuala Lumper Stock Exchange

Nikkei 225

Overbought (RSI > 70)

Cocoa

Rubber

Uranium

Dow Jones Industrial Average

Nasdaq 100

And the S&P 500 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)

Shanghai Composite

Hang Seng China Enterprises Index (HSCEI)

Hang Seng (HSI)

Oversold (RSI < 30)

Chile 2 year government bond yield

China 10 year government bond yield

Nickel on India’s MCX Exchange

Lithium Hydroxide

JKM LNG

Corn 

Soybean

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

None

Notes & Ideas:

Government bond yields were mostly lower for the week, with the exception of the British, Japanese, Swedish and American yields.

Equities were clearly higher for the week.

The only loser of note was Indonesia on the back of upcoming general election gyrations.

The NIFTY, SOX and the CSI 300 have moved out of overbought territory

The Shanghai Composite performed an outside reversal week.

Amsterdam’s AEX is yet to reach a new all-time high.

Low and behold, Europe’s ‘sick man’, Germany closes at its all-time high while the Nasdaq has not.

And remarkably, the S&P 500 has risen 12 or the past 13 weeks.

Commodities were mostly higher.

Cattle is in a 4 week winning streak and has gained in 6 o the past 7 weeks.

Inversely, Newcastle Coal has declined for 7 consecutive weeks, while Soybeans have fallen for 6 straight weeks. The latter having fallen for 10 of the past 11 weeks.

Palladium and Corn broke their respective 4 and 6 week losing streaks.

Nickel on the LME isn’t oversold this week but remains so on India’s MCX exchange.

Lastly, JKM LNG is at its lowest close since December 20, 2020.

In last week’s edition, I alluded to Heating Oil “giving good bullish signals”. It rose 6.8% for the week.

Sugar is in a 4 week winning streak.

Gold (as priced in Australian Dollars) broke its 5 week winning streak.

Soybeans and Corn are registering oversold extremes. 

Soybeans are in a 6 week losing streak and have fallen 10 of the past 11 weeks.

Cattle is still trading at extended percentages (38%) above its 200 week moving average.

And Lithium Hydroxide has now spent 30 consecutive weeks in weekly oversold territory.

Amongst currencies, the AUD has seen its 4th and 5th consecutive week of declines against many pairs, which sits proportionally within my published note on December 29, 2023 that the AUD was ‘full’.

Now, AUD/USD is full

The U.S. Dollar has risen for the past 4 weeks against most pairs.

The Yen was also firmer.

The AUD/CAD, AUD/USD and AUD/INR have declined for 4 consecutive weeks. The later has mean reverted.

The AUD/GBP and the AUD/SGD has fallen for 5 weeks in a row.

The EUR/GBP has eased lower for its 5th straight week,

While the Indonesian Rupiah continues its slide and has now fallen for the 4th week versus the USD.

The larger advancers over the past week comprised of;

Aluminium 4.8%, All World Developed ex USA 2.1%, Cocoa 1.9%, WTI Crude 6.5%, Lean Hogs 5.9%, Copper 1.7%, Heating Oil 6.8%, Coffee 4.7%, Lumber 5.2%, Cattle 2.3%, Tin 3.9%, Natural Gas 7.7%, Nickel 4.6%, Orange Juice 3.1%, Platinum 1.6%, Gasoline 6.4%, S&P GSCI 4.2%, CRB Index 3.1%, Urea Florida Gulf 1.6%, Brent Oil 5.7%, Gasoil 4.9%, Urea Middle East 3.4%, Rice 2%, Shanghai 2.8%, CSI 300 2%, AEX 5%, ATX 3.3%, KBW Bank Index 2.4%, CAC 3.6%, China A50 2.1%, DAX 2.5%, DJ Transport 2%, HSCEI 4.5%, Hang Seng 4.2%, S&P SmallCap 600 1.6%, Russell 2000 1.8%, KRE Regional Bank Index 2.2%, FTSE 250 2.5%, Mexico 2.5%, Helsinki 4.3%, SmallCap Value 600 Index 2.3%, SMI 2.2%, Chile 3.7%, TAEIX 1.8%, FTSE 100 2.3%, ASX 200 1.8%, ASX Materials 3.2% and Istanbul’s BIST 100 rose 4.4%.

The group of largest decliners from the week included;

JKM LNG (3.1%), Lithium Hydroxide (1.5%), Rubber (2%), Uranium (5.9%), Oats (4.2%) and Indonesia fell 3%.

January 28, 2024

by Rob Zdravevski

rob@karriasset.com.au