The VIX does matter

Queuing off the VIX Index remains relevant.

Over the past 30 years, here are 12 moments when the VIX was overbought on a weekly basis and how it corresponded to an adequate signal to accumulate the ‘market’, or the S&P 500 (orange line) in particular.

I don’t use this study in isolation but it’s a handy cross-referencing tool.

April 16, 2023

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending April 14, 2023)

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) 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)

Coffee 

Copenhagen

BRL/USD

EUR/USD

FXE

GBP/USD

DKK/USD

Overbought (RSI > 70)

Hot Rolled Coil Steel (HRC)

Orange Juice

Gold (in AUD)

Silver (in AUD)

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

Cattle

Sugar

Russia’s MOEX Index

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

U.S. Dollar Index (DXY)

Oversold (RSI < 30)

Urea (Middle East)

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

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

Lithium Hydroxide 

Notes & Ideas:

Equities generally firmed around the world, with many seeing 4 consecutive weeks of positive returns, while not all are exhibiting strong trends.

The Nasdaq 100 is the exception while the 8% advance in the Nasdaq Biotech market isn’t.

The Copenhagen equity market made a return to the Overbought ‘extremes’ and it was accompanied by a sympathetic overly-bought DKK (versus the USD).

And I’ll be watching if Switzerland’s SMI and the SPX 500 can make ‘higher highs’.

Amongst bonds, government bond yields rose and this has type of consolidation has been entirely expected following such newsworthy declines. I’ll watch closely if yields rise a little more so to temporarily hurt those late comers who have bet the opposite way.

Commodities generally continued their strength.

Over the past 4 weeks, Sugar has risen 15%, while WTI Crude has extended its run to 22% and Brent Crude has advanced 18% whileSilver priced in AUD has soared 20% in the past 5 weeks.

Some currencies are beginning to touch some extremes again.

With weakness seen in the U.S. Dollar, as evidenced in the DXY Index trading at extreme in this week’s list, the Euro, British Pound and the Danish Krone are showing ‘extreme’ strength against the U.S. Dollar.

i.e. I am seller of some Euro and Pound Sterling and buying USD.

The larger advancers over the past week comprised of;

Aluminium 2.3%, WTI Crude 2.3%, Lean Hogs 8.5%, Copper 2.3%, Lumber 8.9%, Cattle 2.2%, Natural Gas 5.1%, Sugar 2.1%, Palladium 3.7%, Urea U.S. Gulf 8.3%, Brent Crude 2%, Urea Middle East 2.5%, Corn 3.5%, Rice 4.5%, KBW Baking Index 3.2%, CAC 2.7%, DJ Transports 2%, MIB 2.4%, Bovespa 5.4%, KOSPI 3.3%, S&P MidCap 400 1.7%, Nikkei 3.5%, Oslo 2.5%, Copenhagen 3.8%, Stockholm 3%, Russell 2000 1.5%, S&P SmallCap 600 1.2%, TSX 1.9%, FTSE 1.7%, MOEX 3.4%, Chile 2.7%, Mexico 1.8%, Australia’s Small Cap rose 2.8% and the ASX 200 climbed 2%

The group of decliners included;

Australian Coking Coal (2.3%), Baltic Dry Index (8%),Tin (8%) and Dutch TTF Gas fell 4.6% as it works its way towards on Oversold reading.

April 15, 2023

by Rob Zdravevski

rob@karriasset.com.au 

Selling Euro / buying USD

Euro (vs USD) is touching new overbought extremes.

As the trading week comes to a close, we see EUR/USD trading at 1.1060.

Good enough.

The fat part of the trade from those 0.9900 prices seen during the Sept/Oct 2022 lows….has been seen.

April 14, 2023

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending April 7, 2023)

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) 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)

SHY (U.S. 1-3 year bond ETF) 

GBP/USD

Overbought (RSI > 70)

Hot Rolled Coil Steel (HRC)

Cattle

Gold (in AUD)

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

Orange Juice

Sugar

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

Copper/Gold Ratio

U.S. 5 year bond yield minus U.S. 5 year inflation break-even rate

Oversold (RSI < 30)

Urea (U.S. Gulf) 

Urea (Middle East)

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

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

Lithium

Notes & Ideas:

Equities continued with further consolidation with a slight bias towards weakness across most bourses. 

Some may see equites as being range bound for many months now, with may many staying within a 15% range and are still at the same price as June 2022 such as the S&P 500 and Switzerland’s SMI.

The Nasdaq 100 took a break from a 3 week advancing streak by easing 1%, while many small cap indices remain in downward trends.

Amongst bonds, government bond yields generally fell. Many bond yields continue to trade within the boundaries of any extremes but there are some which are getting close to the edge.

Commodities were generally stronger with support seen across the energy complex except for the Gases.

Petroleum energy continued its rebound. WTI Crude has risen 19.4% in 3 weeks while the 3 major Gas commodities contracts continue their declines.

In other notable percentage streaks over the past 2 or 3 weeks, Australian Coking Coal has fallen 19%, Rice has eased 7% while Sugar has soared 13% and Silver has climbed 7.5%.

In currencies, the AUD was weak across all crosses while the EUR strength persists.

The larger advancers over the past week comprised of;

Baltic Dry Index 12.3%, WTI Crude 6.7%, Gasoil 2.3%, Coffee 7.7%, Lumber 3.6%, Orange Juice 2.2%, Gasoline 4.9%, Sugar 6.1%, S&P GSCI 2.6%, Urea U.S. Gulf 6.1%, Brent 6.3%, Silver in AUD 3.8%, Silver in USD 3.6%, Gold in AUD 2.2%, Gold in CAD 1.9%, Gold in USD 2%,CSI 300 1.8% and the FTSE 100 rose 1.4%. 

The group of decliners included;

Australian Coking Coal (14.6%), Aluminium (2.5%), Rotterdam Coal (4.2%), Iron Ore (6.5%), Copper (1.9%), JKM LNG (6.6%), Lithium (13.4%), Natural Gas (9.3%), Nickel (2.3%), Dutch TTF Gas (9.9%), Corn (2.6%), Oats (6.6%), Rice (4.5%), Wheat (2.4%), KBW Bank Index (2%), DJ Transports (3.3%), S&P MidCap 400 (2.6%), Nikkei 225 (1.9%), Stockholm (1.8%), Russell 2000 (2.7%), S&P SmallCap 600 (2.8%), Philadelphia Semiconductor Index (4.9%) and Thailand’s SET Index fell 2%.

April 8, 2023

by Rob Zdravevski

rob@karriasset.com.au