Macro Extremes (week ending June 28, 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)

Australian 10 year minus U.S. 10 year government bond yield spread

AUD/JPY

Overbought (RSI > 70)

Brazilian 10 year government bond yield *

Biodiesel *

GBP/JPY *

Amsterdam’s AEX *

Budapest

Karachi’s KSE *

Nasdaq Composite * 

Nasdaq 100 *

S&P 500 *

and Taiwan’s TAEIX *

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

USD/BRL *

NIFTY *

SENSEX *

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 *

U.S. 10 year minus Australian 10 year government bond yield spread *

U.S. 10 year divided by the Australian 10 year government bond yield 

Lean Hogs

COP/USD

EUR/AUD

And Russia’s MOEX

Oversold (RSI < 30)

Chinese 10 year government bond yield 

North European Hot Rolled Coil Steel *

U.S. Midwest Hot Rolled Coil Steel *

Lumber *

Lithium Hydroxide *

Shanghai Rebar

JPY/USD

JPY/AUD

RMB

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

BRL/USD

Corn

Notes & Ideas:

Government bond yields rose, again, 

Except for the Swiss, Swedish, Finnish and Danish 10’s.

The yield in the Swiss 10’s have fallen for 4 consecutive weeks.

Other than the Chinese and Brazilian 10’s lodging into opposite end of extreme categories, we have interesting bond spreads appearing this week.

And we the U.S. 10-2 yield curve is nearing an oversold extreme.

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, again.

As they bounced, so did many of last week’s oversold entrants.

Other extended their losing streaks to 6 consecutive weeks, among them China’s CSI 300 and Shanghai Composite along with Thailand’s SET.

Chile has fallen for 5 straight weeks.

While China’s A50, Chile’s IPSA and Torontos’ TSX broke their 5 week losing streaks.

Philadelphia Semiconductor Index (SOX) fell 1.2% and is not overbought anymore.

The CAC-40 had a bearish outside reversal week.

While the KOSPI has risen for 4 straight weeks and Indonesia’s main index has climbed 6% over the past fortnight.

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

Once again, the weakness won’t show up in the commodities indices due to the positive skew weighting afforded to the Crude Oil weightings.

Although the Bloomberg Commodity Index has decline for 5 of the past 6 weeks.

Palladium, Sugar and Oats were amongst the few winners.

Coking Coal, Cocoa, Natural Gas and Corn were amongst the notable losers, again.

Lean Hogs have slumped for 9 of the past 10 weeks, falling 14% over that time.

Natural Gas prices have posted a 15% loss during its 3 week losing streak.

Nickel snaps its 5 week losing streak during which its price retracing 16%.

Cocoa has given back 16% of its recent 37% advance seen over the previous 6 weeks.

The Copper/Gold Ratio has declined for 6 consecutive weeks.

Soybeans and Wheat prices have fallen for 5 straight weeks.

Iron Ore snapped its 4 weeks of declines.

Lumber has fallen for 11 weeks of the past 14 weeks.

And Lithium Hydroxide has now spent 50 consecutive weeks in weekly oversold territory.

Currencies continue to provide action, again and again.

Many currencies no longer appearing in extreme categories.

The Aussie rose. 

The Loonie was quiet and mixed.

The USD (DXY) has risen for 4 straight weeks.

The Euro was mainly firmer.

The USD/CLP broke its 5 week rising run.

And the Yen’s weakness dominated news.

The larger advancers over the past week comprised of;

Palladium 5.8%, Raw Sugar 6.5%, Refined Sugar 2.6%, Oats 3.4%, KBW Banks 2.5%, Budapest 2.4%, DJ Transport 2%, Egypt 5.1%, BOVESPA 2.1%, Indonesia 2.5%, Russell 2000 1.3%, KRE Regional Banks 4.5%, Nikkei 2.6%, Nifty 2.2%, PSE 4.1%, Sensex 2.4% and Toronto’s TSX rose 1.5%

The group of largest decliners from the week included;

Australian Coking Coal (4.5%), Cocoa (13.2%), China Coking Coal (6.3%), Lean Hogs (2.7%), Lithium Hydroxide (3.9%), Tin (2.8%), Natural Gas (7.5%0, Orange Juice (2.7%), Robusta Coffee (2.1%), Silver in AUD (1.8%), Corn (7.5%), CAC (2%), HSCEI (1.7%), Vietnam (2.9%) and the Hang Seng fell 1.7%.

June 30, 2024

by Rob Zdravevski

rob@karriasset.com.au