Macro Extremes (week ending August 23, 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)

CAD/USD

CNH/USD *

GBP/USD

PHP/USD

IDR/USD *

KRW/USD

SEK/USD

BOVESPA *

KLSE

ASX Industrials Index

Overbought (RSI > 70)

SHY

Robusta Coffee *

Hungary’s BUX

NIFTY *

SENSEX

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

Gold in USD *

EUR/USD

MYR/USD *

THB/USD *

DKK/USD

SGD/USD *

CHF/USD

Extremes below the Mean (at least 2.5 standard deviations)

10 year Spanish and Portuguese government bond yields *

Sugar No. 16

Oversold (RSI < 30)

North European Hot Rolled Coil Steel *

U.S. Midwest Hot Rolled Coil Steel *

Shanghai Rebar *

Lithium Hydroxide *

Corn *

Soybeans *

MOEX *

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

U.S. 3 month t-bill yield

Australian Coking Coal *

DXY (USD) Index *

Notes & Ideas:

Global government bond yields fell, again.

This week’s rising exceptions were the Danish, Finnish and Japanese yields, again.

The Australian yield curve (10Y minus 2Y) has risen for 5 straight weeks.

Chile’s 2 year yield has risen for 10 straight weeks while the 10 year yield has broken it 7 rising streak.

Equities had another good week.

U.S. small and mid caps led the gainers along with the U.S. banking sector.

Thailand’s SET is tearing higher.

Brazil’s BOVESPA has risen 7.5% over the past 3 weeks and appearing as an overbought extreme, this week.

The ASX Materials Index broke its 6 week losing streak.

And the Nikkei 225 broke its 4 week streak of declines rising 9% and making up half of the 17% decline seen in the prior 4 weeks.

Commodities were mixed, again,

Gold took a breather from last week’s advanced while Silver rose.

Cotton has bounced out of its recent oversold status.

As futures contracts roll, the new forward contract in the U.S. Hot Rolled Coil Steel rose 10% for the week and saw that commodity move out of oversold territory.

Gases were weaker along with coal (coking and thermal) prices.

Wheat and Corn continue to suffer and fall while most other grains and ‘softs’ and finding support, such as Soybeans.

And Lithium Hydroxide has now spent 58 consecutive weeks in weekly oversold territory.

Currencies was were the action was.

The week’s story was dominated by the weakness in the U.S. Dollar.

The DXY is in a 5 week losing streak.

The Aussie rose again, again.

The CAD and the Euro fell against everyone except the USD, of course.

The GBP rose.

The NZD/USD has risen for 5 straight weeks as has the Thai Baht against the USD.

The larger advancers over the past week comprised of;

Baltic Dry Index 4.2%, Cocoa 10.2%, Cotton 5.5%, Lean Hogs 7.2%, HRC 9.5%, Aluminium 7.9%, Nickel 2.4%, Orange Juice 7.7%, Robusta Coffee 9.9%, Sugar 2%, Sugar #16 2.9%, Tin 3.2%, Silver in USD 2.7%, Rice 2.1%, Soybeans 1.7%, All Developed World ex USA 2.6%, KBW Bank Index 2.7%, CAC 1.7%, DAX 1.7%, DJ Transports 1.9%, MIB 1.8%, IBEX 3%, S&P Small Cap 600 3.1%, Russell 2000 3.7%, Nasdaq Composite 1.4%, KRE Regional Bank Index 5.2%,  S&P MidCap 2.9%, Nasdaq Biotech 2.7%, Helsinki 2%, PSE 1.7%, South Africa 1.7%, SET 4%, S&P 500 1.5%, Nasdaq Transports 2.3%, Vietnam 2.6%, ASX Materials 1.8% and the ASX Industrials rose 2.1%.

The group of largest decliners from the week included;

Australian Coking Coal (3.9%), China Coking Coal (3.6%), JKM LNG (4.8%), Lumber (4.6%), Newcastle Coal (2.3%), Natural Gas (3%), Dutch TTF Gas (7%), Gasoil (1.4%), Gold in AUD 1.7%), Gold in CHF (1.9%), Gold in GBP (1.9%), Wheat (4.4%), MOEX (7.4%) and Turkiye’s BIST fell 1.6%.

August 25, 2024

by Rob Zdravevski

rob@karriasset.com.au