Macro Extremes (week ending August 30, 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)

Arabica Coffee

CAD/USD *

EUR/USD

PHP/USD *

ZAR/USD

CHF/USD

ASX Industrials Index *

Overbought (RSI > 70)

SHY *

Rubber

Gold in USD *

Hungary’s BUX *

NIFTY *

SENSEX *

ASX Financials Index

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

Robusta Coffee *

CNH/USD *

MYR/USD *

THB/USD *

KLSE *

Extremes below the Mean (at least 2.5 standard deviations)

10 year Chilean government bond yields

DXY (USD) Index *

USD/DKK *

USD/IDR *

USD/KRW

Oversold (RSI < 30)

North European Hot Rolled Coil Steel *

U.S. Midwest Hot Rolled Coil Steel *

Lithium Carbonate *

Lithium Hydroxide *

Corn *

MOEX *

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

U.S. 3 month t-bill yield *

Notes & Ideas:

Global government bond yields rose, bucking the past 2 weeks of declines.

It’s worthy to note that many yields remain in downtrends although they aren’t exhibiting any strength.

The few yield that fell included Belgian, Danish and Finnish. For several weeks, this block of yields have been moving in the opposite direction than the ‘others’. I don’t have a grasp on what this means yet.

The Australian yield curve broke its 6 week rising streak.

Chile’s 2 year yield has risen for 11 straight weeks. A previous post cited the interest I have in Chile’s yield curve. Inversely, it’s 10’s are in a downtrend.

And the U.S. yield curve is a whisker from ‘un-inverting’. Gosh, what will the pundits say when it does? No more recession, which never came?

Furthermore, its close to appearing in the ‘overbought’ quinella category of this publication.

Equities had another good week.

Many are cranking out 4 week winning streaks such as the AEX, ATX, CAC, DJ Industrials, MIB, HSCEI, Hang Seng, IBEX, Bovespa, IDX, the Dow Jones Transports and the S&P 500.

Russia’s MOEX is in a 6 week losing streak.

Malaysia’s KLSE is overbought and mimicking the strength of its currency. 

And Australia’s Industrials and Financial indices are also overbought.

Commodities were mixed, again and again.

The big news is that lithium prices rose 2%, although context is required, for  Lithium Hydroxide has now spent 59 consecutive weeks in weekly oversold territory.

Gold remained tame while Silver gave away last week’s gain.

The grains complex bounced and this dragged Soybeans from its oversold status.

Most energy contracts fell with the exception of LNG Gas.

Silver, Uranium and Lumber were also amongst the losers.

And the Baltic Dry Index has risen 8.5% over the past 3 weeks.

Currencies saw a lot of action, again.

The DXY rose and broke its 5 week losing streak.

This was enough to move the USD/SGD out of oversold territory.

While the USD has been falling against everyone, the MXN is closing overbought territory.

The Aussie and GBP were mixed, albeit their bias’ has been upwards for the past 3 weeks.

The Yen was slightly weaker

As for streaks, the The Indonesian Rupiah has risen for 5 weeks against the USD.

AUD/EUR has risen for 4 weeks straight.

The NZD/USD has risen for 5 straight weeks 

And the Thai Baht broke its 5 week rising run against the U.S. Dollar.

The larger advancers over the past week comprised of;

Baltic Dry Index 3%, Lean Hogs 2.1%, JKM LNG 2%, Cattle 1.7%, JKM in Yen 3.2%, Lithium Carbonate 1.9%, Lithium Hydroxide 2.5%, Palladium 2%, Robusta Coffee 4.9%, Sugar 5.4%, Dutch TTF Gas 6.5%, Corn 2.2%, Oats 9%, Soybeans 2.7%, Wheat 4.2%, KBW Bank Index 2%, Egypt 2.1%, MIB 2.2%, HSCEI 1.8%, Hang Seng 2.1%, KLSE 2.6%, Helsinki and Stockholm 1.5%, Strait Times 1.6%, TA35 2%, ASX Financials 2.2% and BIST rose 1.7%.

The group of largest decliners from the week included;

Aluminium (3.4%), WTI Crude (1.8%), Heating Oil (3.6%), Lumber (2.6%), Natural Gas (3.5%), Orange Juice (4.5%), Platinum (3.5%), Brent Crude (2.6%), Uranium (3.9%), Silver in AUD (2.8%), Silver in USD (3.2%) and China’s A50 Index fell 1.7%.

September 1, 2024

by Rob Zdravevski

rob@karriasset.com.au