Macro Extremes (week ending October 25, 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)

Palladium

Silver in AUD & USD

Tel Aviv 35

And Australia’s ASX Small Caps *

Overbought (RSI > 70)

U.S. 10 year bond yield minus the U.S. Inflation Rate (YoY)

Gold as priced in AUD, CAD, EUR, GBP USD & ZAR *

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

Gold as priced in CHF *

Pakistan’s KSE *

Extremes below the Mean (at least 2.5 standard deviations)

Baltic Dry Index

Oversold (RSI < 30)

U.S. 3 month government bill yield *

Australian Coking Coal *

U.S. Midwest Hot Rolled Coil Steel *

North European Hot Rolled Coil Steel *

Lithium Carbonate *

Lithium Hydroxide *

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

None

Notes & Ideas:

Global government bond yields rose.

The Brazilian, Finnish and Korean yields bucked that trend.

Australian yields have risen for 4 consecutive weeks.

The U.S. 10 year vs Euro 10 year spread yield has climbed for 6 straight weeks,

as has the U.S. 10 year bond yield minus the U.S. 10 year inflation breakeven rate.

U.S. 2’s are their highest weekly close in 2 months.

Lastly, the U.S. 20 year bond yield has risen for 5 of the past 6 weeks.

Equities were weaker.

North American and Asian indices were the most weakest.

The U.S. Transports indices dropped out overbought territory as did the Dow Jones Industrials, Thailand’s SET and Toronto’s TSX.

The Hang Seng and HSCEI are in 3 week losing streaks.

The Nikkei 225 has declined 4.2% over the past fortnight.

India’s Nifty and Sensex have fallen for 4 consecutive weeks which isn’t surprising after spending a couple months trading at various extremes. 

The ASX Materials index has also declined for the past 4 weeks. 

The Tel Aviv 25 Index is at an all-time high……

And the Dow Jones Industrials, Nasdaq Composite, S&P MidCap 400 and the S&P 500 all broke their 6 week winning streaks.

Commodity prices were stronger.

Energy prices bounced back and Palladium, Gold, Orange Juice, Corn & Soybeans were the other prominent gainers.

Cocoa, Coffee, Uranium, Nickel and Shipping Rates were the notable decliners for the week.

The former has declined 13% over the past fortnight.

Copper, the Baltic Dry Index and Robusta Coffee have fallen for 4 straight weeks. 

The latter has slumped 20% over that time, while the Baltic Dry Index is at oversold extreme.

Furthermore, the Baltic Dry Index has fallen 38% over the past 3 weeks.

China Coking Coal completed a reversion to the mean.

The Copper/Gold Ratio has fallen for 4 consecutive weeks.

Palladium is at its highest closing price since mid-December 2023.

Lean Hogs are in a 6 week winning streak.

Natural Gas soared 13.4% making up half of the 24% decline seen in the previous 3 weeks.

U.S.Midwest Hot Rolled Coil Steel has spent 22 weeks being oversold.

And Lithium Hydroxide has now lingered in weekly oversold territory for 67 consecutive weeks.

Currencies action was dominated by U.S. strength, again; again.

The DXY Index is at its highest close in 3 months and is in a 4 week rising streak.

The Aussie weakened, again, again.

The Yen was weaker.

The Aussie has fallen for 4 weeks against the Rupiah and the USD.

Similarly, the Brazilian Real, Canadian Dollar and Yen have also declined for the past 4 weeks versus the USD.

Philippines Peso’s falling streak vs USD has extended to  weeks as has the EUR/USD.

While the Swiss Franc rose for the week.

The larger advancers over the past week comprised of;

Aluminium 2.4%, Bloomberg Commodity Index 2%, WTI Crude Oil 4.5%, Lean Hogs 2.4%, Heating Oil 4%, JKM LNG 3.9%, JKM in Yen 3.9%, Natural Gas 13.4%, Orange Juice 6%, Palladium 10.9%, Gasoline 3.6%, S&P GSCI 2.7%, CRB Index 1.8%, Dutch TTF Gas 11%, Brent Crude 3.8%, Gasoil 4.3%, Silver in AUD 1.6%, Gold in AUD 2.5%, Gold in EUR 1.6%, Gold in GBP 1.7%, Corn 2.6%, Soybean 1.5%, KSE 5.6% and Oslo rose 1.9%.

The group of largest decliners from the week included;

Baltic Dry Index (10.5%), Cocoa (9.1%), Arabica Coffee (3.5%), Lithium Hydroxide (4.4%), Nickel (4.4%), Robusta Coffee (5.8%), Uranium (2.5%), Developed World ex USA (2.1%), KBW Baks (1.5%), CAC (1.5%), DJ Industrials (2.7%), DJ Transports (1.7%), S&P SmallCap 600 (3.1%), Russell 2000 (3%), KLSE (1.7%), KRE Regional Banks (2.9%), FTSE 250 (1.6%), S&P MidCap 400 (2.8%),  Mexico (2.3%), Nasdaq Biotech (2.6%), Nikkei 225 (2.7%), Helsinki (1.5%), Sensex (2.2%), SET (1.8%), S&P 500 (1%), TSX (1.5%), Vietnam (2.6%), WIG (2.3%) and the ASX Industrials fell 2.2%. 

October 27, 2024

by Rob Zdravevski

rob@karriasset.com.au