Macro Extremes (week ending September 10, 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)

Cocoa

Shanghai Composite equity index

Russia’s MOEX equity index

Japan’s Nikkei 225 index

Overbought (RSI > 70)

Hot Rolled Coil Steel (for the 50th consecutive week)

Natural Gas

the Nasdaq 100 index

Amsterdam’s AEX,

and India’s NIFTY 50 equity index

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

Aluminium

Assets (securities) within my immediate universe 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)

None

Oversold (RSI < 30)

Iron Ore

Brazil’s BOVESPA equity index

Notes & Ideas:

This past week continued last week’s general muted state of activity especially amongst currencies and equities.

Notable departures from the list included the previously overbought Cattle, the S&P 500 and the Nordic stock exchanges.

This list is the smallest over the past 6 months.

The larger advancers over the past week comprised of Aluminium +7%, Natural Gas +5%, Nickel +4%, Copper +2.7% and China’s Shanghai and CSI 300 indices both rose 3.4%.

The Shanghai Composite has risen 8% in the past 3 weeks….

The group of decliners included Platinum (6.3%), Wheat (5%), Sugar (4%), Silver (3.6%), Tin (3.3%), Coffee (2.5%), Cocoa (2%), Gold (2%), Nikkei 22 (2.8%), S&P Midcap 400 (2.7%), both Dow Jones and Nasdaq Transportation indices fell 2.7%, the Bovespa, SMI and Kospi declined (2.3%), Spain’s IBEX (2%), the Dow Jones Industrial Average (2%), the S&P 500 (1.7%) and Australia’a ASX 200 fell 1.6% for the week.

September 11, 2021

by Rob Zdravevski

rob@karriasset.com.au

Economy Health Check

I’m watching the Copper/Gold Ratio (HG/GC)

Its direction tells me about the health of the economy.

The direction of the HG/GC also helps confirm the direction of interest rates. More specifically, the U.S. government 10 year bond yield.

In the chart below, I’ve overlaid a price chart (in blue) of the S&P 500 against the HG/GC.

You can see that the general direction of both the SPX and the HG/GC follow each other.

At this moment, the HG/GC is nearing a point where it breaks either way.

We’ll need to wait and watch in the coming week or so.

In my earlier post today, I imply that interest rates may rise.

This, then suggests that the HG/GC breaks higher (meaning Copper rises and Gold declines) which translate into the S&P 500 rising further.

A ‘melt-up’ in the S&P 500 is not a perverse idea, especially against the grain of many who are calling the top, let alone a crash.

It may seem odd to think, but markets often move to where they can do the most damage…..

and going higher can damage those who have been on the sidelines or sold up recently.

Missing out can also hurt investors.

September 10, 2021

by Rob Zdravevski

rob@karriasset.com.au.

Watching interest rates closely

Watching some macro signals today.

In the chart below, I’m watching the U.S. Year government bond yield.

Notice how over the past 6 weeks, the 10’s are making ‘higher highs’ and ‘higher lows’.

Now, they need to hold 1.265%. If they do, then they should test 1.385%.

If they break 1.385%, then 1.47% and 1.57% are next important levels to test.

Recently, rising interest rates have favoured cyclical and industrial equities, while falling yields have given the ‘technology’ stocks a boost.

September 10, 2021
by Rob Zdravevski
rob@karriasset.com.au.

Trading Buy – Iron Ore

At the time of writing, Iron Ore is trading $136.

It’s close to the $132 mark which is the upper end of the circled range in my article link below.

$132 is also its 100 week moving average.

Albeit there is a gap in the chart at $124.50 and I think it could be ‘backed and filled’, notwithstanding an additional 4%-7% decline, Iron Ore is nearing the region of a ‘trading buy’, which may give buyers a 35% bounce up to the $180 mark.

#ironore

September 8, 2021

by Rob Zdravevski

rob@karriasset.com.au.

Dividend Bounty


Last week, $2.7 billion was paid out to shareholders of Australian (ASX) listed companies, in the form of a dividend.

This week, nearly $1 billion is hitting shareholders bank accounts.

Then a further $2 billion next week.

The last 2 weeks of September sees $30 billion credited.

Over a 2 month span (between Aug 30th – Oct 31st), $41 billion of dividends will be remitted.

This bounty amounts to being close to 2% of the ASX’s total capitalisation, which is approximately $2.55 trillion.

Furthermore, keep in mind that this cash wasn’t raised from any selling pressure or activity. It is being distributed by the corporations.

That’s a lot of ‘new’ money which will be reinvested into the market by institutions, self managed super funds and other investors.

September 8, 2021

by Rob Zdravevski

rob@karriasset.com.au

More rigs, more output, lower oil price

Globally, 40% more oil and gas rigs have been put to work compared to 12 months ago.

In the U.S., the amount of rigs which snapped back to life doubled since last August.

Rigs in operation throughout Latin America have nearly doubled in number.

While the Canadian’s have trebled.

Interestingly, the amount of rigs deployed in the Middle East and Europe have declined.

Overall, more drilling leads to more output which puts a lid on the price of oil, which coincides with my bearish call on crude.

What else does the table below tell us?

The Saudi’s are trying to keep output tight in order to keep prices high, because ‘petro-nations’ need ‘petro-dollars’.

Carbon conscious Europe and their headquartered hydrocarbon giants (BP, Total, Statoil, Shell, Repsol, ENI) are trying to drill less.

The Americans need to drill to service the consuming citizens, make money, use their capex, satisfy shareholders and avoid being a net importer of oil.

And the Canadians are just ecstatic that extracting tar sands oil became economically viable again.

September 8, 2021

by Rob Zdravevski

rob@karriasset.com.au.

We’ve bought all the stuff we need

An extract from the recent Wells Fargo quarterly call transcript said……

“For Wells Fargo consumer customers, nearly $50 billion of federal stimulus payments from rounds two and three have been deposited into our customers’ accounts, and we estimate roughly 25% remained in their accounts as of July 2.”

Consumers have bought at the stuff they need. The stimulus money has been spent. They don’t need anymore TV’s, computers and refrigerators.

See Ed’s valuable research contribution below.

https://www.linkedin.com/posts/edward-yardeni_economy-economics-macroeconomics-activity-6841093040304721921-i3w_

Bitcoin is still not a currency

At its lowest point, Bitcoin fell 18% in today’s trading. Other crypto currencies mimicked the action.

Top tip: cryptos are correlated.

So, a Salvadoran who accepted Bitcoin as legal tender yesterday just saw the value of that ‘currency’ decline between 10-18% in a single day.

That’s quite a kick in the gut for an impoverished nation, Bitcoin isn’t exactly an example of stability.

If someone wants to make a case, that a new owner of Bitcoin tomorrow may then stand a chance to make ‘that 18% back’…….that’s hardly something I’d call a currency.

I’ll keep referring to cryptos as a speculative instrument and not a currency.

September 8, 2021
by Rob Zdravevski
rob@karriasset.com.au

No shortage of buy ideas

It may seem perverse but my global equities buying list is much larger than those stocks which need to be sold.

Interim rotation, value over growth

Whoot ! U.S. 10 year government yields have broken above a trend line I’ve been watching.

Expect to see value stocks and financials perform better than the high flying growth stocks.

There is always something to do.

September 7, 2021
by Rob Zdravevski
rob@karriasset.com.au

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