Macro Extremes (week ending June 21, 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)

AUD/EUR

GBP/EUR

ZAR/USD

KOSPI

NIFTY

SENSEX

Overbought (RSI > 70)

Brazilian 10 year government bond yield *

Biodiesel *

Robusta Coffee

GBP/JPY

PHP/USD

RMD/USD

AEX *

KSE *

S&P 500 *

BIST 100

and Taiwan’s TAEIX *

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

USD/BRL

Nasdaq Composite *

Philadelphia Semiconductor Index (SOX) *

Nasdaq 100 *

Extremes below the Mean (at least 2.5 standard deviations)

Australian 10 year minus Australian 2 year government bond yield spread *

Australian 10 year minus Australian 5 year government bond yield spread *

Sweden 10 year government bond yield

Lean Hogs

AUD/ZAR

COP/USD

EUR/GBP

IDR/USD

MXN/USD

CAC Index

IBOV

Indonesia’s IDX *

MOEX

Phillipines PSE

Thailand’s SET *

And the ASX Materials Index

Oversold (RSI < 30)

Chilean 2 year government bond yield *

North European Hot Rolled Coil Steel *

U.S. Midwest Hot Rolled Coil Steel *

Lumber *

Lithium Hydroxide *

PHP/USD *

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

BRL/USD

Notes & Ideas:

Government bond yields rose, breaking short-term rising trends;

Except for Swiss, Spanish, British and Portuguese.

U.S. 5 & 10 year breakeven inflation rates bounced off their oversold lows.

And Chilean 2 year yields broke their 8 consecutive weeks of declines, In last week’s note, I commented that their oversold reading may lead the world in a trough in yields.

Equities saw strength, mostly.

Some extended their losing streaks to 5 consecutive weeks, among them being the CSI 300, Shanghai Composite, China A50, SET and Toronto’s TSX.

Chile has fallen for 5 straight weeks.

Austria’s ATX rose and broke its 4 week losing run.

Mexico and Helsinki also broke their respective streaks.

The TAIEX has soared 9.5% over the past 3 weeks.

While the ASX Materials Index has “meant reverted” in its 5 week decline.

Commodities were mixed, again, with a bias towards weakness.

The commodities indices won’t expressed it due to the positive skew weighting afforded to the Crude Oil weightings.

Shipping, Palladium, Platinum, Oils and Distillates were stronger.

Thermal and Coking Coal, Cocoa, Steel, Lumber, Grains and Gases were weaker.

Cocoa gave up 8% of its recent 37% advance seen over the previous 4 weeks.

The Copper/Gold Ratio has declined for 5 consecutive weeks as have Nickel prices.

Iron Ore, Soybeans and Wheat prices have fallen for 4 straight weeks.

Wheat has slumped 21% in 4 weeks, Oats have tanked 24% in the last 3 weeks.

Lean Hogs have declined for 8 of the past 9 weeks.

Lumber has fallen for 10 weeks of the past 13 weeks.

Robusta Coffee performed a bullish outside several week. 

And Lithium Hydroxide has now spent 49 consecutive weeks in weekly oversold territory.

Currencies continue to provide action, again and again.

The Aussie was higher, again except against the South African Rand.

The Euro was mixed.

The Yen is nearing an oversold reading against the AUD.

The USD has risen for 5 consecutive weeks against the Colombian Peso

The U.S. Dollar was mostly stronger.

And the CHF/AUD broke its 4 week rising streak.

The larger advancers over the past week comprised of;

Baltic Dry Index 2.5%, WTI Crude 3.4%, Palladium 2.9%, Platinum 3.9%, Gasoline 4.6%, Robusta Coffee 4.5%, Brent Crude 3%, Gasoil 2.8%, KBW Bank Index 1.6%, DAX 0.9%, DJ Industrials 1.5%, DJ Transports 2.1%, MIB 2%, IBOV 1.4%, IDX 3.6%, KRE Regional Banks 1.9%, KSE 2.7%, MCX 1.6%, South Africa 3.3%, TAIEX 3.3%, BIST 2.9% and ASX Small Caps 1.7%.

The group of largest decliners from the week included;

Australian Coking Coal (3.2%), Cocoa (8.2%), China Coking Coal (3.1%), HRC (1.9%), JKM LNG  (2.3%), Lumber (9.1%), JKM LNG in Yen (2.5%), Newcastle Coal (2.5%), Natural Gas (6.1%), Shanghai Rebar (2%), Sugar (2.4%), Dutch TTF Gas (4%), Uranium (2.6%), Gold in ZAR (2.5%), Corn (3.3%), Oats (6.4%), Soybean (2.6%), Wheat (8.4%) and the Phillipines PSE Index fell 3.5%.

June 23, 2024

by Rob Zdravevski

rob@karriasset.com.au