Macro Extremes (week ending February 2, 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

Overbought (RSI > 70)

SHY 

Cocoa

Rubber

Uranium

AEX

Dow Jones Industrial Average

Nasdaq 100

Nasdaq Composite

NIFTY

And the S&P 500 Index

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

KLSE – the Kuala Lumper Stock Exchange

Turkiye’s BIST 100 Index

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

None

Oversold (RSI < 30)

Chile 2 year government bond yield

JKM LNG

Lithium Hydroxide

Nickel on India’s MCX Exchange

Corn 

Soybean

CSI 300 

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

China 10 year government bond yield

Shanghai Composite Index

Notes & Ideas:

Government bond yields were mostly lower for the week, again, even with jump in yields seen in Friday’s session.

The British 2’s, 3’s and 5’s were the exception, wth rising yields for the 2nd consecutive week).

The Japanese 2’s rose in stunning fashion. They have climbed from 0.00% to 0.10% over the past 3 weeks.

Equities were mixed, with a slight weaker bias, although many more are appearing in the overbought column.

Indonesia rose 3.5% reclaiming all of last week’s decline.

The Dow Jones Industrial Average has pout together a 4 week winning streak and has spent the past 8 weeks in overbought territory.

The S&P 500 is also in a 4 week winning streak and has risen for 13 of its past 14 weeks.

The Shanghai Composite has now registered an oversold quinella.

Amsterdam’s AEX and the Nasdaq Composite are yet to reach a new all-time high but the former did close at its highest weekly close.

The Nasdaq Transportation Index finished at its highest weekly close but yet it to break its previous all-time high. It has risen 7% in the past 3 weeks.

And Turkiye’s BIST has risen for 5 consecutive weeks making for 15% (in TRY terms) return.

Commodities were weaker with energy contracts.

To accompany that weakness in energy, WTI Crude, Brent Crude and Gasoline prices posted bearish outside reversal weeks.

Cattle is in a 5 week winning streak and has gained in 7 of the past 8 weeks. Furthermore, Cattle is still trading at extended percentages (39%) above its 200 week moving average.

Newcastle Coal broke its 7 week losing streak.

Heating Oil fell 5.5% giving up most of last week’s 6.8% rise.

Sugar is in a 5 week winning streak.

Soybeans and Corn are registering oversold extremes. 

Soybeans are in a 7 week losing streak and have fallen 11 of the past 12 weeks.

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

And Lithium Hydroxide has now spent 31 consecutive weeks in weekly oversold territory.

Amongst currencies, the AUD has seen its 5th and 6th 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 5 weeks against most pairs.

The Yen was also firmer.

The AUD/CAD, AUD/USD and AUD/INR have declined for 5 consecutive weeks. The CAD/USD has done the same.

The AUD/GBP and the AUD/SGD has fallen for 6 weeks in a row.

The EUR/GBP has eased lower for its 6th straight week.

The larger advancers over the past week comprised of;

Rotterdam Coal 5%, Cocoa 7.2%, Cotton 3.3%, JKM LNG 1.8%, Newcastle Coal 2.4%, Orange Juice 20.3%, Dutch TTF Gas 4%, Uranium 6%, Gold AUD 2.1%, Oats 2.2%, Rice 2.5%, DJ Industrials 1.4%, Indonesia 3.5%, KOSPI 5.5%, Mexico 2.4%, NIFTY 2.4%, Sensex 2%, Nasdaq Transports 2.3%, BIST 100 3.8%, ASX 200 1.9% and the ASX Small Caps rose 2.5%.

For some reference, the Nasdaq Composite and the S&P 500 rose 1.1% and 1.4% respectively.

The group of largest decliners from the week included;

Australian Coking Coal (5%), Bloomberg Commodity Index (2.1%), Baltic Dry Index (7.3%), China Coking Coal (5%), WTI Crude (7.4%), Iron Ore (5.4%), Heating Oil (5.5%), Lumber (3.4%), Lithium (12.4%), Natural Gas (4.4%), Nickel (3.4%), Platinum (2.1%), Gasoline (7.7%), S&P GSCI (3.8%), Brent Crude (6.9%), Gasoil (2.6%), Soybean (1.7%), Shanghai (6.2%), CSI 300 (4.6%), KBW Banking Index (1.7%), China A50 (4.4%), HSCEI (2.6%), Hang Seng (2.6%), KRE Regional Bank Index (7.2%), Oslo (1.7%), Helsinki (2.3%), S&P SmallCap Value (2%) and Switzerland’s fell 1.3%.

For some reference, the S&P Small Cap 600 fell 1.2%, the Russell 2000 declined 1%, the SOX closed 0.1% lower and Toronto’s TSX eased 0.2% for the week.

February 4, 2024

by Rob Zdravevski

rob@karriasset.com.au