Trying to hear what's not being said
June 14, 2022 Leave a comment
As a revision to last week’s post,
the chart below shows the S&P 500 is trading only 8% above its 200 weekly moving average.
So, the thinking goes, a move of 8% lower to the 3,503 region satisfies a mean reversion to the 200 week moving average and also has it ‘double dipping’ into oversold territory.
June 14, 2022
by Rob Zdravevski
rob@karriasset.com.au
June 14, 2022 Leave a comment
I’m reposting an updated chart with annotations showing the percentage that the Nasdaq 100 is trading below its 200 day moving average.
The Nasdaq 100 registering its largest ‘discount’ to its 200 day moving average in more than 10 years, is telling you that it is more so in buying range than selling time.
What is missing is that it isn’t yet oversold on a daily basis, let alone weekly.
In older posts I have referred to a decline in the FAANGM stocks as the ones which will help the broader index price move lower towards its 200 week moving average and an Oversold reading.
June 14, 2022
by Rob Zdravevski
rob@karriasset.com.au
June 13, 2022 Leave a comment
Bitcoin is now closing on a lower price target I have mentioned in past writings, being the $22,000 level.
The chart below revises that target as being $22,500, give or take $300 either way.
It’s getting close, for today’s low is
$23,892 or $23,707 depending which exchange you are watching.
However, the main message is not about buying cryptocurrencies but instead using Bitcoin as an indicator of risk appetite.
The S&P 500 and Nasdaq should have commensurate swoon.
Irrespective, whether such targets are 3% or 7% away, it’s telling me that it is close and good enough.
Especially if you are taking a longer-term horizon.
June 13, 2022
by Rob Zdravevski
rob@karriasset.com.au
June 13, 2022 Leave a comment
This chart of Palladium shows the risk of chasing asset price spikes at moments when the herd is reacting to news events.
It also shows the power of mean reversion especially when prices trade in a parabolic manner.
Lastly, that ‘blue line’ is also an illustration of not anchoring yourself to ‘last years’ prices.
In other words, even though the price has fallen 44% in the past few months, that long term, 200 week moving average is no longer trading at $800, instead that mean has rolled higher and is now $1,960.
As far as the Palladium price is concerned, the $1,500 mark is a point where sellers may ‘wash’ themselves out.
June 13, 2022
by Rob Zdravevski
rob@karriasset.com.au
June 12, 2022 Leave a comment
The following assets (on a weekly timeframe) registered an Overbought or Oversold reading and/or have traded more than 2.5 standard deviations above or below its rolling mean.
Extremes “above” the Mean (at least 2.5 standard deviations)
None
Overbought (RSI > 70)
Australian 2, 3, 5 & 10 year government bond yields
Canadian, Swiss, Spanish, French, Greek, Italian, South Korean, New Zealand, Swedish and Portuguese 10 year government bond yields
U.S. 2, 5 & 10 year government bond yields
German 2, 5 & 10 year government bond yields
TBT & TBX
U.S. Dollar (DXY) Index
CRB Index
Bloomberg Commodity Index
Natural Gas
Gasoline
WTI Crude Oil (September ’22 and December ’22 contracts)
USD/JPY
The Overbought Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)
British 10 year government bond year yields
Extremes “below” the Mean (at least 2.5 standard deviations)
None
Oversold (RSI < 30)
NZD/AUD
JPY/USD
TLT & IEF
US 10 year minus Australia 10 year government bond yields
The Oversold Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)
None
Notes & Ideas:
The big news for the week was that global government bond yields made new, recent highs, everywhere, except for the U.S. 10’s.
The Canadian 10’s moved from 3.07% to 3.38% and Australian 10’s rose from 3.50% to 3.76%, hitting its highest level not seen since June 2014.
All the G-10 nations (except the U.S.) saw their government bond yield rise to mimic June 2014 prices.
While the yield in the U.S. 10 year yield peaked in the past week at 3.18%, it didn’t trade above its week ending May 9th, 2022 high of 3.20%, let alone its 3.25% high seen in October 2018.
Although the U.S. 10’s high in June 2014 was 3.05%.
In other news, the U.S. Dollar Index also failed to trade above its May 9th weekly high and WTI Crude Oil didn’t make news highs either.
Most global equities took a drubbing and the sentiment seems awfully bearish but note that these indices didn’t make ‘lower lows’.
The only equity markets to register gains this week were those tracking Chinese and Hong Kong stocks. The Shanghai Composite Index has risen 9% in 5 weeks and 14% since its April 25 low.
It’s worthy to note that we saw outside bearish reversal week’s in the DAX, CAC, Dow Jones Transports, S&P Mid Cap and Small Cap indices.
However, my work suggests that major western equity indices are not about to embark on a major, new or extended downward leg.
Many indices are already showing weekly RSI readings in their 30’s, they are closing in on their longer term mean reversions, nearing their lower band of normal standard deviations and when coupled with my other trend and momentum indicators, my work suggests that the ‘set-up’ isn’t in place for such a move.
Cryptocurrencies saw more weakness. Ethereum fell 20%. With little fanfare and news, it seems like apathy may mark an upcoming low. I’ve marked $22,500 as a target for Bitcoin. That’s 18% lower than its current price of $27,500 as I write this.
Silver also had a outside bearish reversal week as it works its way down to it 200 week moving average of $20.36, which is a further 7% below todays price.
The CRB (commodities) Index remains overbought, for the 21st consecutive week.
Last week, I wrote that while “Copper rose for the week as did the Copper/Gold ratio. The latter hit and didn’t break resistance.”
This week, Copper fell which aided how the Copper/Gold ratio behaved, for it did not break above that resistance line.
Lumber fell 10% for its 2nd week in a row and a blog post from earlier in the week revises a buying entry point as $460 per tonne.
Last week, I wrote a reminder to watch if Gold (in AUD) holds the A$2,500 level.
It did and has, the low for the week was A$2,544
And the Japanese 10’s tell us that things aren’t that bad as they idle around the 26 basis points mark.
The larger advancers over the past week comprised of;
China Coal 7.3%, WTI Crude Oil 1.5%, DXY 2%, Heating Oil 2%, Cattle 2%, Tin 7.3%, Natural Gas 3.8%, Orange Juice 2.4%, Cotton 5%, Uranium 2.5%, Silver in AUD 2.2%, Gold in AUD 3.5%, Corn 6.4%, Soybeans 2.8%, Wheat 3%, Shanghai Composite 2.8%, CSI-300 3.7%, HSCEI 4.7%, HSI 3.4%.
The group of decliners included;
Australian Coal (8.2%), Aluminium (2%), Rotterdam Coal (3%), Baltic Dry Index (11.9%), Gasoil (2.8%), Hogs (2.2%), Copper (4%), JKM (3.5%), Lumber (10.8%), Palladium (4%), Platinum (4%), Gasoline (1.9%), Sugar (2.2%), Urea (9%), Oats (5.7%), Rice (3.3%), Bitcoin (8.5%), Cardano (10.8%), GBTC (3%), Ethereum (20.2%), AEX 2.7%, KBW Bank Index (7.8%), CAC (4.6%), DAX (4.8%), Dow Jones Industrials (4.6%), DJ Transports (7.5%), MIB (6.7%), IBEX (3.8%), Bovespa (5.1%), KOSPI (2.8%), Midcap 400 (4.6%), Nasdaq 100 (3.6%), Sensex (2.3%), Oslo (2.7%), Copenhagen (3.4%), Helsinki (2.7%), Stockholm (3.8%), Russell (4.4%), SMI (3.9%), SOX (7.5%), S&P 500 (5.1%), FTSE-100 (2.9%), Canada’s TSX (2.5%), S&P SmallCap 600 (4.3%), Biotech Index (5.2%) and Australia’s ASX 200 fell 4.2%.
June 12, 2022
by Rob Zdravevski
rob@karriasset.com.au
June 10, 2022 Leave a comment
Continuing today’s theme and sermon, the chart below (in amongst dire, ‘the sky is falling’ news and sentiment) shows the S&P 500 already hitting an Oversold reading and only its 9th occurrence in 41 years.
Look for the circles denote so, in the chart.
The previous moment before 1987 was in 1981.
June 10, 2022
by Rob Zdravevski
rob@karriasset.com.au
June 10, 2022 Leave a comment
A year ago, I wrote this note. It has some additional links to read as well.
That note was about watching the relationship between the U.S. yield curve the lows seen in the S&P 500, on a daily basis.
Today’s note highlights a much bigger picture.
It’s a weekly observation over more than 3 decades.
From the ‘page’ of being a constant investor and accumulator and never is one, a seller…..
I’d like to direct readers attention to the orange line of the S&P 500 in the attached chart.
The chart requires a little time to stare and digest it.
The circles are placed at moments when the yield curve was Oversold.
It’s not necessarily when the curve was “inverted”.
I have placed vertical lines near as many occurrences without making the lower timeline looking crowded.
For some reference, the yield curve (or spread) is the calculation between the yield of the U.S. government 10 year bond and that of the U.S. government 2 year bond.
This “oversold” moment has happened 14 times in the past 33 years.
This also coincided with attractive, long-term accumulation points in the S&P 500.
The two moments when this thesis failed was when the yield curve notably traded and crossed above the S&P 500, which is highlighted by the blue ellipses.
Today, this scenario is Oversold YET the spread is NO where near crossing ‘above’.
There are no blue circles appearing.
In the context of years, a few months should be insignificant for the longer-term investor.
Today’s message happens to match last months musing’s about the lows in the S&P 500 and Nasdaq…..
and the Buy signals in my recent newsletter….
https://mailchi.mp/karriasset/buy-signals-appearing
June 10, 2022
by Rob Zdravevski
rob@karriasset.com.au
June 10, 2022 Leave a comment
On May 23rd, 2022, I wrote a note about Lumber.
Within it I said, that Lumber…..
“It also tends to lead the S&P 500 in near-term peaks and troughs.”
“I also think it has been a handy barometer of inflation or at least scarcity of supply.
With today’s price trading down to that $570 support level mentioned in that note and also to its 200 week moving average, I don’t think Lumber’s price decline is over.
I think you can buy your timber 15% cheaper than today’s price.
$481 is my Buy price.
June 10, 2022
by Rob Zdravevski
rob@karriasset.com.au
June 10, 2022 Leave a comment
The Australian Dollar compared to the Japanese Yen is one of my favourite ‘risk appetite’ indicator.
The chart below shows it mirroring the CRB (commodities) Index.
The Yen is at its weakest point against the AUD in 7 years.
Against the U.S. Dollar, the last time the Yen that this week was 20 years ago.
And then the CRB is its highest level in 11 years.
Now, I’ll watch for a change in trend, a crossing of moving averages and break of support lines in the AUD/JPY.
If this occurs, then my thinking that inflation will abate and a retracement in recently hot commodities markets should follow.
June 10, 2022
by Rob Zdravevski
rob@karriasset.com.au
June 10, 2022 Leave a comment
A decline in tonight’s (Friday) U.S. Consumer Price Index (CPI) report will help confirm my thinking that inflation will abate.
Keep in mind, that the CPI figure is a lagging reading, which is why I’m posting a chart of U.S. inflation and the AUD/USD.
You’ll notice the symbiotic relationship until lately.
The AUD not rallying along with the rate of inflation tells me inflation will abate.
I believe currency (and credit) markets before anything else.
June 10, 2022
by Rob Zdravevski
rob@karriasset.com.au
rob zdravevski's blog 