Macro Extremes (week ending November 1, 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)

British 2, 3, 5 and 10 year government bond yields

Lumber

Overbought (RSI > 70)

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

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

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

U.S. 5 year bond yield minus 3 month bill yield

U.S. 5 year bond yield minus U.S. Inflation Rate (YoY)

Lean Hogs

Pakistan’s KSE *

Extremes below the Mean (at least 2.5 standard deviations)

BRL/USD

Copenhagen

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)

Colombian Peso vs USD

Notes & Ideas:

Global government bond yields rose, again.

Australian yields have risen for 5 consecutive weeks.

The U.S. 10 year vs Euro 10 year spread yield has climbed for 7 straight weeks,

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

U.S. 3 month bills are yielding their lowest since mid-March 2023.

U.S. 2’s are their highest weekly close in 3 months.

The U.S. 10 year bond yield has risen for 5 of the past 7 weeks.

And the Aussie yield curve is nearly overbought.

Equities were weaker, again.

The Hang Seng and HSCEI are in 4 week losing streaks.

The Nasdaq Compose broke its 7 week winning streak while also performing a bearish outside reversal.

Mexico’s main index has declined 4.5% over the past fortnight.

The ASX Materials index along with India’s Nifty and Sensex all broke their 4 week losing streak. 

And Oslo’s OBX and Stockholm’s OMX30 both posted a weekly bearish outside reversal.

Commodity prices were weaker.

Energy prices saw weakness with gas prices having a shocker.

Palladium and Silver dropped out from overbought status.

This week, they dropped 8% and 3% respectively.

The Baltic Dry Index and Robusta Coffee have fallen for 5 straight weeks. 

The former has fallen 40% over the past 4 weeks.

Copper broke its 4 week streak of declines, by only a whisker.

Lean Hogs have climbed for 5 weeks.

Cocoa recovered last weeks decline.

Cattle and Platinum both posted a bearish outside reversal week.

Nickel and Sugar have fallen for 4 straight weeks. The former may re-test recent lows.

Robusta Coffee and Rice have sunken for 5 and 6 consecutive weeks, respectively.

Gold was subdues, while Silver was a notable loser.

U.S.Midwest Hot Rolled Coil Steel has spent 23 weeks being oversold.

And Lithium Hydroxide has now lingered in weekly oversold territory for 68 consecutive weeks.

Currencies saw the most amount of streaks being extended.

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

The Aussie weakened, again, now for the 4th week against many and for 5 weeks specifically versus the USD.

The Yen and Canadian Dollar were weaker.

The Loonie is in a 5 week losing streak against the USD.

I found it interesting that the CAD has risen for 3 weeks vs the AUD.

The Euro rose and the EUR/GBP posted a bullish outside reversal.

The GBP/USD, the JPY/USD, MYR/USD, SGD/USD and NZD/USD have all fallen for 5 straight weeks.

Philippines Peso is in a 6 week losing streak vs USD.

And the GBP has climbed for 4 weeks versus the Aussie.

The larger advancers over the past week comprised of;

Cocoa 8.4%, Lean Hogs 5.5%, Lumber 5%, Brent Crude 3.8%, Oats 5%, DJ Transports 1.5% and the KRE Regional Bank Index rose 1.3%.

The group of largest decliners from the week included;

Aluminium (3.3%), Rotterdam Coal (2.5%), Bloomberg Commodity Index (2.2%), Baltic Dry Index (2.3%), WTI Crude Oil (3.2%), JKM LNG (2.3%), Arabica Coffee (2.2%), Brent Crude Oil (3.6%), Lithium Carbonate (2.7%), Lithium Hydroxide (4.9%), Newcastle Coal (2.3%), Natural Gas (14.5%), Nickel (1.6%), Palladium (7.8%), Platinum (3.3%), Gasoline (3.5%), Robusta Coffee (3%), S&P GSCI (2.1%), CRB Index (1.8%), Dutch TTF Gas (10.4%), Uranium (3.3%), Silver in AUD (3.1%), Silver in USD (3.8%), Rice (1.8%), CSI 300 (1.7%), AEX (1.7%), Bovespa (1.4%), TAIEX (2.4%), Nasdaq Composite (1.5%), KOSPI (1.6%), Mexico (2.4%), FTSE 250 (1.6%), Nasdaq 100 (1.6%), Oslo (1.9%), Helsinki (2%), PSI (2.3%), SMI (1.8%), SOX (4.1%), Chile (2.8%), S&P 500 (1.4%) and ASX Financial fell 1.6%.

November 3, 2024

by Rob Zdravevski

rob@karriasset.com.au