Watching credit markets can help you with equities

This is where we are on a weekly basis in the U.S. 10 year bond yield.

Range bound, in no man’s land and oscillating between 1.75% and 1.15% and a reasonable trading range at that.

It has also been a trap lately. At the upper end, many are going long cyclicals and financials only to be whipsawed when the 10’s trade to the lower end, which is when many go long in technology.

Let’s watch which way its break into this triangle.

My bet is that the yield goes lower a little bit more and sends the S&P 500 to 4,440 or 4,360 (which is 1.6% – 3.4% below today’s close) and set us up for a new equities advance.

Irrespective of this little nuance prediction, today, there are a host of quality businesses whose stock prices have received a drubbing.

December 2, 2021

by Rob Zdravevski

rob@karriasset.com.au

Watching Oil, Copper & AUD support

I’m keenly watching Crude Oil prices today.
The chart below shows the support level Brent is at.
Those trendlines were drawn up on November 5th, when Brent was $85.

Note, the other commentary as well. Amongst monitoring other indicators, the price action that I am watching is whether or not we see new ‘lower lows’.

Copper is testing a $4.20 support and the AUDUSD is flirting whether it holds 0.7100.

December 2, 2021
by Rob Zdravevski
rob@karriasset.com.au

Parabola’s first, Mean Reversion later

Here is another case of a parabolic price move followed by a halving in price, in very quick fashion.

The price of Rotterdam (delivered) Coal quadrupled within 6 months during the middle part of 2021, to only see it fall and now heading back towards its 200 week moving average.

I’ll check back on this one in a month or so.

November 30, 2021

by Rob Zdravevski

rob@karriasset.com.au

AUD is close to having a breather

Since the 1st quarter of 2021, the AUD (versus USD) has made lower high’s and new lower low’s.

Recently it has broken some support trendlines and this week, it made a new lower low.

This suggests a move to the 0.7050 – 0.7000 area., which is where I expect support to be found along with some consolidation.

After all, the currency is in its 5th consecutive week of declines.

However, the AUDUSD has entered a new longer term bearish trend.

It would need to trade above 0.7450 to negate that view.

Failing to hold that, I’ll look for a test of 0.6930.

0.6780 – 0.6730 is the next stop below that.

November 30, 2021

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending November 26th, 2021)

The following assets (on a weekly timeframe) registered an Overbought reading or traded more than 2.5 standard deviations above its rolling mean.

Extremes “above” the Mean (at least 2.5 standard deviations)

Chinese government 10 year bond yield

Nasdaq 100

Nickel

(although they all peaked earlier in the week)

Overbought (RSI > 70)

the JKM “Japan/Korea (LNG) Marker”

Tin

Urea 

and Australian Coal 



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

U.S. Dollar (DXY) Index

Coffee

Cattle

Wheat

The last two were highlighted in the following posts;

Assets (securities) which touched the other side of the extreme, being Oversold (where the RSI is < 30) or were at least 2.5 standard deviations below its mean are;

Extremes “below” the Mean (at least 2.5 standard deviations)

Hot Rolled Coil Steel (HRC)

EUR/GBP – suggesting a weaker Euro versus the British Pound

SGD/USD

TRY/USD

And Spain’s IBEX equity index

Oversold (RSI < 30)

Iron Ore



The Oversold Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean.

EUR/USD – suggesting a weaker Euro

DKK/USD

SEK/USD

(These were highlighted in a mid-week note, https://robzdravevski.com/2021/11/25/currency-trade-ideas/  )

Notes & Ideas:

Volatility returned this week, but mainly on the Friday following the Thanksgiving Holiday amid lighter volume and driven by a headline on a new COVID variant.

Amongst the drubbing seen in the energy markets, it’s worthy to note the bearish outside reversal week seen in the Nasdaq, S&P 500 and SOX. My earlier note today makes further comment about this past Friday’s action.

https://mailchi.mp/karriasset/perspective-positioning-and-opportunity-1

Other observations I noticed during the week include;

This week’s list of ‘extremes’ is the smallest I’ve seen for quite some time, telling me many prices are busy meandering or heading to the other side of their range.

Bond yield aren’t featured in the list (unlike the past 2 weeks).

Hot Rolled Coil Steel is down 18% from its recent high, albeit not a dent on its 5 fold increase over the past 18 months.

The U.S. banking index only fell 1.1% for the week.

While Crude Oil fell 10% for the week, Natural Gas rose 8%.

Gasoline and other energy markets touched daily Oversold levels (but not weekly, which the timeframe basis of this periodical).

The larger advancers over the past week comprised of the Baltic Dry Index 8.4%, Iron Ore 1%, JKM 2%, Coffee 4.1%, Cattle 3.4%, Tin 2.9%, Natural Gas 8.1%, Corn 28%, and Istanbul’s BIST equity index rose 3.4%. 

The group of decliners included Aluminium (2.9%), Bloomberg Commodity Index (2.3%), Cocoa (7.2%), WTI Crude Oil (10.3%), Gasoil (8.1%), Gold (3.6%), Copper (2.8%), Heating Oil (8.7%), HRC (10.8%), Lumber (4.5%), Orange Juice (2.9%), Platinum (7.9%), Gasoline (10.4%), Sugar (3.2%), Silver (6.8%), CRB Commodity Index (3.5%), Brent Crude (7.1%), Gold in AUD (2.9%), Rice (1.9%), Chinese Coal (2.2%), Urea (2.1%), Bitcoin (7.9%), Ethereum (5.7%), Cardano (19%), AEX (4.9%), CAC (5.2%), DAX (5.6%), Dow Jones Industrial Average (2%), DJ Transports (1.8%), FTSE MIB (5.4%), HSCEI (4.4%), HSI (3.9%), IBEX (4%), S&P Midcap 400 (3.3%), MOEX (4.4%), Nasdaq (3.3%), Nikkei (3.3%), Sensex (4.2%), Oslo (3.9%), Copenhagen (4%), Helsinki (3.7%), Russell 2000 (4.2%), SMI (2.8%), SOX (4%), S&P 500 (2.2%), STI (2%), TAEIX (2.5%), Nasdaq Transports (2.5%), UK FTSE 100 (2.5%) and Australia’s ASX 200 fell 1.6% for the week.

November 29, 2021

by Rob Zdravevski

rob@karriasset.com.au

Some perspective

Today’s newsletter makes comment about Friday’s market moves.

What I think about the ‘market’ is entirely different to what I think about specific stocks and other asset classes.

I guess, there is always something to do and other places to look, when it comes to investing.

https://mailchi.mp/karriasset/perspective-positioning-and-opportunity-1

Australia’s RBA remains stubbornly behind

This article failed to mention that Australian’s are the 2nd most indebted citizens (% of household debt to GDP) in the world.

https://www.bloomberg.com/news/articles/2021-11-24/traders-betting-rba-will-soon-follow-rbnz-may-have-to-wait?sref=qLOW1ygh

As a result, raising interest rates will add to mortgage repayment stress.

Furthermore, the meeting minutes of the Korean and Kiwi centeal banks cited soaring residential real estate prices along with rising prices (inflation) as reasons to hike rates.

The Aussies only talk of the latter.

Rates eventually dohbking would hurt the indebted Australian home owner terribly. The rising net interest margin will make the banks a fortune but only to a point where defaults don’t ramp up.

Banks like taking deposits and lending money. They don’t want to become landlords.

See how the RBA is in a combination of being the curve or between a rock and a hard place?

November 25, 2021
by Rob Zdravevski
rob@karriasset.com.au

Ooops ! JP Morgan…

Dimon’s backpedaling is not a surprise.
China’s silence and lack of rebuke makes for good viewing.

It’s another case of knowing and watching how the world works.

One could paraphrase it as ‘knowing which side your bread is buttered’.

“Earlier this year, the bank one approval from Chinese regulators to fully own its Chinese securities venture…….”

https://www.bloomberg.com/news/articles/2021-11-24/jpmorgan-started-damage-control-as-soon-as-dimon-made-china-joke?sref=qLOW1ygh

November 25, 2021
by Rob Zdravevski
rob@karriasset.com.au

Where’s The Beef?

I think Cattle prices have reached an interim high.

CME prices are currently US$1.38 per pound.

Whether you’re a farmer, producer, investor, processor or speculator, I would either lock in forward prices or take the money and run (all the way until the cows come home…..)

The fat part of the trade has been had. The chart below shows the Cattle price rising 64% over the past 18 months.

My medium-term downside price target is $1.10.

That could also mean selling your shares in the world’s largest meatpacker, JBS. Its price chart showing its stellar performance is also attached.

Does this make shares in plant based, meat substitute company, Beyond Meat (BYND) attractive?

November 25, 2021
by Rob Zdravevski
rob@karriasset.com.au

#cattle #beef

Currency Trade Ideas

This week and today, we are also seeing an extreme in the U.S. Dollar (DXY) Index and as a result certain currencies are exhibiting notable weakness, which I think translate into an attractive buying opportunity.

My three strategic currency ideas are;

Sell USD and Buy EUR (current price is 1.1210)
– Once the Euro’s have been bought, I’m waiting for some specific stocks prices. Some on my list include SAP and ArcelorMittal.

Sell USD and Buy JPY (current price is 115.40)
– there are some Japanese equities on my buying list.

Sell USD and Buy SEK (currently 9.1130)
– Swedish equities have already rallied and benefitted from a weaker currency. The likes of Sandvik, Atlas Copco, Swedbank and Assa Abloy. The laggard is airline, SAS. This strategy is more applicable for those need to Buy Krona for corporate and business purposes.

The GBP (versus the USD) isn’t quite there. 1.3260 could be the place to buy Sterling.

November 25, 2021
by Rob Zdravevski
rob@karriasset.com.au

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