Macro Extremes (week ending May 10, 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.

• denotes multiple week inclusion

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

Oats *

Hang Seng China Enterprises Index (HSCEI) *

Hang Seng Index *

South Africa 40 *

FTSE 250

Helsinki 

Overbought (RSI > 70)

Russian 10 year government bond yield 

Japanese 2 year government bond yield 

Copper

Gold as priced in USD, GBP, EUR, CHF and CAD

AEX *

Budapest *

DAX

MIB

Stockholm

TAEIX

Malaysia’s KLSE *

Pakistan’s KSE Index *

FTSE 250

and Turkiye’s BIST 100 *

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

Austria’a ATX

Oslo

FTSE 100

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

None

Oversold (RSI < 30)

Lithium Hydroxide *

North European Hot Rolled Coil Steel *

Midwest U.S. Hot Rolled Coil Steel

Lumber *

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

None

Notes & Ideas:

Government bond yields were mixed, with a slight bias higher.

Generally, those yields which were overbought in the recent weeks, fell and those yields that weren’t overbought…rose over the past week.

Equities were mostly higher, with Indian indices amongst the few to decline.

Europe was stronger. Perhaps it was a Eurovision rally?

It has been nearly 3 years since the FTSE 250 has registered an overbought extreme. It has risen 6.5% over the past 3 weeks.

Germany’s DAX, Italy’s MIB, & Stockholm’s OSX 30 are back in overbought territory.

The HSCEI and Hang Seng have both risen 16% in the past 3 weeks.

Furthermore, the Shanghai Composite, CSI 300, the U.S. (KRE) Regional Banks Index and Malaysia’s KLCI Index are in a 4 week winning streaks.

China’s A50 Index and the U.S. KBW Bank Index have risen 7.5% and 8% respectively, over the past 4 weeks.

And the Nasdaq Transports broke its 5 week losing streak.

Commodities were mostly stronger.

Precious Metals, Grains, Gases and Softs were stronger.

Oats are in a 5 week winning streak and have climbed 26.5% over that time.

Urea, Steel and Lumber prices were weaker. Lumber has tanked 20% over the past 7 weeks.

Some of the grains are now seeing 4 weeks of consecutive gains.

Copper and Gold are overbought, while Hot Rolled Coil Steel, Lumber and Lithium are in the oversold category.

Robusta Coffee has fallen 18% over the past fortnight which accounts for nearly half of the 39% rise seen in the prior 10 weeks.

Cotton has fallen for 10 consecutive weeks, sinking 21% over that time and nearing oversold territory.

Over the past fortnight, Platinum has risen 9% while Gasoline has slumped 9%.

The Baltic Dry Index has soared 23% in 2 weeks.

And Lithium Hydroxide has now spent 43 consecutive weeks in weekly oversold territory.

Currencies were generally quiet for the week except for the renewed weakness in the Yen.

The AUD fell against all except the Yen.

The Euro was firmer and the EUR/USD is in a 4 week winning streak.

And the U.S. Dollar rose against everyone except anything called a Peso.

The larger advancers over the past week comprised of;

Baltic Dry Index 13.5%, Cocoa 9.2%, JKM LNG in Yen 6.9%, Tin 6.3%, Natural Gas 5.1%, Orange Juice 6.5%, Palladium 3.5%, Platinum 4.3%, Silver in AUD 6.1%, Gold in AUD 2.6%, Gold in USD 2.5%, Corn 2.1%, Oats 6.1%, Rice 2.7%, Wheat 6.6%, CSI 300 1.7%, AEX 2.6%, ATX 2.7%, KBW 2.7%, Budapest 1.8%, CAC 3.3%, DAX 4.3%, DJ Industrials 2.2%, MIB 3.1%, HSCEI 2.6%, Hang Seng 2.6%, IBEX 2.3%, S&P SmallCap 600 1.7%, Nasdaq Composite 1.1%, KOSPI 1.9%, FTSE 250 2.4%, S&P MidCap 400 2.2%, Nasdaq 100 1.5%, Oslo 3.5%, Copenhagen 2.3%, Helsinki 3.3%, Stockholm 3.5%, SA40 2.7%, SMI 4.3%, SOX 2%, S&P 500 1.9%, TAEIX 1.9%, Nasdaq Transports 2%, TSX 1.7%, FTSE 100 2.7%, Vietnam 1.9%, ASX 200 1.6%, ASX Industrials 1.7%, ASX Small Caps 1.5% and the Tel Aviv 35 rose 3.3%.

The group of largest decliners from the week included;

U.S. Hot Rolled Coil (HRC) Steel (4.1%), Lumber (2.1%), Newcastle Coal (2%), Gasoline (2.2%), Robusta Coffee (2.9%), Urea Middle East (2.3%), NIFTY (1.9%) and India’s SENSEX fell 1.7%.

May 12, 2024

by Rob Zdravevski

rob@karriasset.com.au