Macro Extremes (week ending March 8, 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

U.S. 3 month bill yield

Russian 10 year bond yield

Rotterdam Coal

Cotton

Gold in GBP and ZAR

Overbought (RSI > 70)

Japanese 2 year bond yield

Cocoa

Robusta Coffee 

Rubber

FTSE All World (developed ex-USA) index

AEX

Budapest

CAC 30

DAX

Dow Jones Industrial Average

Italy’s MIB

KLSE

S&P MidCap 400

Nikkei 225

NIFTY 50

OMX Copenhagen

SENSEX 

Philadelphia Semiconductor Index (SOX)

Nasdaq Transportation Index

And the S&P 500 Index

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

Gold in AUD, CAD, JPY, EUR and USD

Egypt 30 Index

TAIEX

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

Wheat

Oversold (RSI < 30)

JKM LNG

Lithium Hydroxide

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

Chinese 10 year government bond yields

Notes & Ideas:

Government bond yields were lower with most of them using after their recent rise to their rolling weekly means.

All yields were lower, except for the Japanese, again.

The yield for the Japanese 2’s and 5’s are in their respective 8 and 5 week rising streaks.

The Chinese 10’s are the notable oversold extreme in this week’s list.

While the Chilean 10’s and German 2’s broke their 4 week winning (yield) run.

Equities were mostly higher with many continuing to appear in the list of overbought extremes.

The Shanghai Composite and the CSI 300 have put together a 4 week winning streak, the DAX is at 5 weeks, the Philippines main index has risen for 7 straight weeks while the S&P Midcaps have closed higher for 9 consecutive weeks. 

The Nasdaq Composite and Nasdaq 100 aren’t overbought anymore.

Mexico has fallen for 5 straight weeks.

Brazil’s BOVESPA has bucked the direction of most global bourses by falling 5.2% since its Christmas overbought reading.

Russia’s MOEX 10 closed at another all-time high.

Last week’s bullish outside reversal week for Copenhagen’s OMX 25 saw it follow through with a 2% rise.

The S&P 500 is still overbought. This week’s decline of 0.3% means it has only declined for 3 weeks of the past 19 weeks.

The CAC, the AEX and DAX resumed posting new all-time highs.

The Dow Jones Industrial Average has now spent the past 13 weeks in overbought territory.

The Philippines Stock Exchange has put together a 6 week winning streak.

Australia’s ASX 200 is nearing overbought levels.

And Italy’s MIB has traded to its highest point since May 2008.

Commodities were mixed.

The big news is that the price of Gold (in 5 major currencies) is in this week’s overbought quinella category.

Over the past 3 weeks, Gold in USD and AUD have risen 8% and 6.5% respectively.

So much, that Gold as priced in AUD is 24% above its 200 week moving average.

Coking Coal, Gas and Oils were weaker.

Raw Cane Sugar had a terrible week.

Grains, Precious Metals and Industrial Metals were firmer.

Corn and Soybeans are not oversold anymore. In fact, Soybeans have risen for the past 2 weeks after snapping their recent 10 week losing streak.

Cocoa has spent 20 weeks in overbought land.

The Copper/Gold ratio is nearing lower extremes.

Nickel has risen 12% in the past 4 weeks.

Uranium is in a 5 week losing streak.

Rotterdam Coal has risen 18% in the past fortnight.

The Baltic Dry Index has risen for 5 consecutive weeks.

Cattle broke its 9 week rising run.

And Lithium Hydroxide has now spent 35 consecutive weeks in weekly oversold territory.

Currencies saw a firmer Aussie, Yen and British Pound.

Although in a contest between two of these stronger currencies, the GBP fell for a 2nd week against the Yen, thus easing it away from its highest point since mid 2015.

The following AUD pairs saw them perform weekly bullish outside reversals, AUDINR, AUDUSD and the AUD CAD.

The Loonie was weaker, so much that the CAD/EUR is in a 4 week losing streak.

The Euro was also weaker against everyone except the USD.

The DXY Index lost 1.1% for the week

And the USDSEK has fallen for 5 straight weeks.

The larger advancers over the past week comprised of;

Rotterdam Coal 3.8%, Baltic Dry Index 6.5%, Hot Rolled Coil Steel 3.8%, JKM LNG 1.9%, Tin 2.3%, Nickel 2%, Palladium 6.5%, Platinum 3%, Robusta Coffee 4.4%, Silver 5.1%, Rubber 2.4%, Dutch TTF Gas 2.3%, Silver in AUD 3.5%, Gold in AUD 3.1%, Gold in CAD 4.1%, Gold in USD 4.6%, Corn 3.5%, Soybeans 2.8%, KBW Regional Banks 3%, Egypt 8.1%, IBEX 2.4%, Indonesia 2.3%, KRE Regional Banks 4.1%, S&P MidCap 400 1.5%, Copenhagen 1.9%, TAIEX 4.5% and the ASX 200 rose 1.3%.

The group of largest decliners from the week included;

Australian Coking Coal (2%), China Coking Coal (2%), WTI Crude (2.5%), Lean Hogs (3.8%), Heating Oil (2.6%), Lithium Hydroxide (7.2%), Natural Gas (1.6%), Gasoline (3.3%), Raw Cane Sugar (4.9%), Brent Crude (1.8%), Gasoil (2.9%), Urea Middle East (2.3%), Uranium (3%), Oats (2.4%), Rice (3.9%), Wheat (3.6%), Nasdaq Composite (1.2%), Chile (2.2%) and the Nasdaq 100 fell 1.6%.

March 10, 2024

by Rob Zdravevski

rob@karriasset.com.au