Macro Extremes (week ending July 26, 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)

U.S. 10 year minus U.S. 2 year government bond yield spread *

U.S. 10 year minus U.S. 5 year government bond yield spread *

U.S. 30 year minus U.S. 10 year government bond yield spread *

CHF/AUD

USD/CAD

S&P Small Cap 600 *

Russell 2000 *

Overbought (RSI > 70)

Hungary’s BUX *

Nasdaq Biotechnology Index * 

NIFTY *

SENSEX *

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

KBW Bank Index *

KRE Regional Bank Index *

Extremes below the Mean (at least 2.5 standard deviations)

Bloomberg Commodity Index

S&P GSCI Index

AUD/GBP

CAD/EUR *

Shanghai Composite

CAD/USD

Oversold (RSI < 30)

North European Hot Rolled Coil Steel *

U.S. Midwest Hot Rolled Coil Steel *

Lithium Hydroxide *

Corn *

BRL/USD

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

None

Notes & Ideas:

Government bond yields fell, except Japan’s.

The yield on Chinese 10’s touch all-time lows.

Czech 10’s have mean converged nicely. 

The Canadian, Chilean, Spanish, French Greek, Italian, South Korean and Portuguese 10 year yields have fallen for 4 consecutive weeks.

While Finnish yields have risen for 4 straight weeks and Chilean 2’s are on a 6 week winning streak.

The trend in the latter has helped flatten the Chilean yield curve.

Equities mostly closed 1% either side of last weeks close.

The rotation into small and mid caps has resulted in those indices appearing in the ‘extreme’ overbought category in this weeks edition.

The Philippine’s PSE and Indonesia’s IDX 30 respectively broke their 4 and 5 winning streaks.

The Nikkei 225 and SOX have declined 9% and 12%, respectively over the past fortnight.

The U.S. Regional Banks Index has climbed 26% over the past 6 weeks and soared 21% in the last 3.

Pakistan’s and Turkiye’s main index aren’t overbought anymore.

Toronto’s TSX rose but didn’t move above the all time high seen in the previous week.

And the FTSE 100 performed a bullish outside reversal week.

Commodities continued its bias for lower prices.

Iron Ore and Sugar have fallen for 4 straight weeks.

Lean Hog prices have climbed for 4 weeks in a row.

Copper and Brent Crude have sunk 12% and 9% respectively over the past 3 weeks.

Coffee isn’t overbought anymore.

While Lumber and Soybeans are no longer oversold,

In fact, Lumber has put together a 7% rise over the past few weeks.

Tin has declined 12% in the last fortnight.

Natural Gas has swooned for 6 of the last 7 weeks

Aluminium has sunk 17% over the past 9 weeks.

While Gold as priced in CAD and AUD has advanced for the past 4 and 5 weeks, respectively. 

And Lithium Hydroxide has now spent 54 consecutive weeks in weekly oversold territory.

Currencies continue to provide action, again and again.

The Aussie and the Loonie were both weaker, again.

The Aussie has fallen for 4 straight weeks versus the GBP.

CAD/EUR is in a 5 week losing streak.

Euro firmness against most.

The Yen was strong, as risk was shunned in the equities market.

In fact, since being recently overbought, the AUD/JPY has seen a decline of 7% in the past 3 weeks.

The Chinese Renminbi bounced out from oversold territory.

And the Kiwi barely broke its 5 week decline again the Aussie.

The larger advancers over the past week comprised of;

Rotterdam Coal 2.2%, Cocoa 4.5%, Lean Hogs 2.1%, Lumber 2.5%, Cattle 2.8%, Rice 7%, KBW Banks 2.6%, DAX 1.4%, S&Pm SmallCap 600 3.5%, Russell 2000 3.4%, KRE Regional Banks 5.8%, FTSE 250 1.4%, S&P MidCap 400 2%, Nasdaq Biotech’s 2.5%, South Africa 1.7% and the FTSE 100 rose 1.6%.

The group of largest decliners from the week included;

Australian Coking Coal (3.3%), Aluminium (2.6%), Baltic Dry Index (4.9%), WTI Crude (1.9%), Cotton (3.8%), Copper (2.7%), Coffee (3.3%), LNG in Yen (3.5%), Tin (7.1%), Natural Gas (5.7%), Nickel (2.9%), Palladium (1.7%), Platinum (3%), Robusta Coffee (5%), TSI Iron Ore (1.5%), Brent Crude (3.6%), Gasoil (2.4%), Uranium (1.9%), Silver in AUD (2.4%), Silver in USD (4.4%), Oats (4.2%), Wheat (3.6%), Shanghai Composite (3.1%), CSI 300 (3.7%), China A50 (3.8%), HSCEI (2.5%), Hang Seng (2.3%), Nasdaq Composite (2.1%), KLSE (1.5%), KSE (2.6%), KOSPI (2.3%), Mexico (1.6%), Nasdaq 100 (2.6%), Nikkei 225 (6%), SOX (3.1%), Chile (1.8%), S&P 500 (0.8%), TAIEX (3.3%), Vietnam (1.8%), BIST (2.4%) and Poland’s WIG fell 2.5%. 

July 28, 2024

by Rob Zdravevski

rob@karriasset.com.au