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Macro Extremes (week ending May 6, 2022)

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)

Cotton

EUR/GBP

Overbought (RSI > 70)

Australian 2, 3, 5 & 10 year government bond yields

Canadian, Spanish, French, Greek, British, Italian, Korean, Swedish, Portuguese and New Zealand 10 year government bond yields

German 2, 5 and 10 year yields

U.S. 2, 5 & 10 year yields

TBX

CRB (Commodities) Index and Bloomberg Commodities Index

U.S. Dollar (DXY) Index

Gasoline

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

TBT

Natural Gas

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

Gold/Copper Ratio

U.S. 10 year yield minus Australian 10 year yield

Taiwan’s TAEIX index



Oversold (RSI < 30)

TLT

IEF

China’s CSI 300

Shanghai Composite

Russia’s MOEX Index

JPY/USD

EUR/USD

SGD/USD

DKK/USD

CNH/USD

HKD/USD

FXE

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

GBP/USD

KRW/USD



Notes & Ideas:

This past week’s big news was bond yields new highs. Which means bond prices hit new, recent lows…..but not in Japan.

The Aussie yield curve is nearly oversold, but not inverted. More on this in a future note.

The U.S. spread is back at 0.40%, a target I’ve mentioned some weeks ago (see bull steepeners).

U.S. Bond ETF’s (TLT & IEF) have never been oversold (on a monthly basis) before…..

The Gold/Copper ratio has made a new appearance in the ‘extreme list’. It’s encroaching of an important support line was mentioned in last week’s edition. Old notes of mine have discussed this ratio’s correlation to the economy’s health and interest rates.

Other observations include;

Bitcoin has fallen 10% since breaking last week’s mentioned support line.

Aluminium has declined 27% in the past 9 weeks.

The S&P 500 has posted 5 consecutive weekly declines, not seen for quite a while.

Although, it only fell 0.2% this past week, as did the Dow Jones Industrials.

There is an ‘image misnomer’ in the past week’s action. While there was continued carnage in selected stocks, U.S. indices posted a surprisingly mild week. 

In fact, North American bourses rode out the week quite well. Most of the declines were seen in Europe with the Nordic’s taking the larger brunt, continued weakness in Asia and Australia posted its largest weekly decline since the February 24th, 2022 Ukrainian invasion.

More so, many indices are yet to make ‘lower lows’ than those seen in March 2022.

The Dow Jones Transports rose 0.2% for the week, the MidCap 400 only fell 0.8%, the Nasdaq 100 surprisingly only declined 1.3% as did the Russell 2000.

The latter is nearing its 200 week moving average and an oversold reading. ETF buyers prepare !

The weakness in the Yen versus the AUD in no longer at 7 years lows but the JPY/USD saw more weakness, its lowest price in 20 years (April 2002).

This obviously makes Japanese products and services more competitive.

There was a divergence amongst the energy complex. Heating Oil., Distillate (Gasoil) & Coal slid while Crude Oil, Gasoline and Natural gas rose decently.

Interestingly, Natural Gas rose 11% on the week, even though it fell 8% during Friday’s trade alone.

One thing to watch is that the CRB Index didn’t make a new high, while the U.S. Dollar Index (DXY) did.

Stockholm, Helsinki, Kospi, Bovespa, MIB, DAX and KBW Bank Index are nearing their 200 week moving average.

The IBEX, CSI 300, HSCEI and Hang Seng are below their 200 WMA.

and once again, Precious Metals fell while major equities indices did the same.

The larger advancers over the past week comprised of; 

Baltic Dry Index 13.1% (up 25% in 3 weeks), Rotterdam Coal 22.9% (recovering last week’s fall), WTI Crude 4.9%, Natural Gas 11%, Platinum 1.8%, Gasoline 9.2%, Dutch TTF GAs 2.3%, Brent Crude 6.1%, Uranium 3.3%, Wheat 5%, KBW Bank Index 2.2%, SOX 2.1%.

The group of decliners included;

Australian Coal (2.2%), Aluminium (7.2%), Cocoa (3%), China Coal (4.2%), Gasoil (7.2%), Copper (3.2%), Heating Oil (17.3%), JKM (2%), Coffee (5.3%), Lumber (9.6%), LNG (4.1%), Nickel (6%), Orange Juice (2.4%), Palladium (12.3%), Silver (3.1%), Urea (2%), Corn (3.5%), Oats (3.5%), Rice (2.8%), Soybeans (3.7%), Bitcoin (10.3%), Ethereum (10.3%), Cardano (6.6%), AEX (4.1%), CAC (4.2%), CSI 300 (2.7%), DAX (3%), MIB (3.2%), HSCEI (6.7%), Hang Seng (5.2%), IBEX (3.1%), Bovespa (2.5%), Kospi (1.9%), Nasdaq 100 (1.3%), Sensex (1.9%), Oslo (2.1%), Copenhagen (5.8%), Helsinki (3.6%), Stockholm (4.7%), Swiss SMI (3.3%), Singapore’s STI (1.9%), FTSE 100 (2.1%) and the Australia’s ASX 200 fell 3.1%.

May 8, 2022

by Rob Zdravevski

rob@karriasset.com.au  

When bonds and stocks both fall

When bonds and equities both fall, it’s a sign of indiscriminate selling.

Big Tech has been an obvious victim and the watchlist below shows that it doesn’t matter what you own.

In fact, during yesterday’s trading, there weren’t many places to hide.

There have been some reports citing that this past day mimics those seen on October 9, 2008 and March 18, 2020.

All this tells us is that some parties are in some type of forced liquidation. There is no use in speculating who and why.

However, such an occurrence isn’t reliable in calling a bottom in the S&P 500 as other indicators such as long-term RSI’s, Standard Deviations and VIX (to name a few) do not marry up with the plunges seen in 2008 and 2020.

May 6, 2022

by Rob Zdravevski

rob@karriasset.com.au

Trying to hear what is not being said – May 5, 2022

I recall Goldman Sachs calling for $200 oil when it was trading at $130. It soon dropped to $90.

It’s a little bit funny that I’m not hearing that prediction being repeated anytime over the past 6 weeks.

In the meantime, Goldman Sachs did $100 million in trading revenue on 32 separate business days in the 1st quarter. Their trading division accounted for 61% of its quarterly revenue. 

As far as profits are concerned, I wonder how much the proprietary trading division made during the quarter?

Do people ever think it is possible that while an investment house is promoting its market calls to ‘buy’ something, that the same investment house may be the seller of their own stock or inventory?

May 5, 2022

by Rob Zdravevski

rob@karriasset.com.au

Trying to hear what’s not being said – May 5, 2022

Readers of my weekly ‘Macro Extremes’ note may deduce that the following are Overbought and ’Stretched”

Cotton (up 50% in 4 months)

Rice (up 22% in 4 months)

Corn (up 36% in 4 months)

Natural Gas (Henry Hub price) has soared 117% in 3 months

These higher prices are good for the producers and onerous for the buyers of the raw material.

However, the contrarian thinks about what the story looks like when things change and move in the opposite direction.

For those who chased the news and fearfully bought something at the wrong end of the pendulum, you may be surprised to know that since the week surrounding February 28th – March 7th, 2022 (Ukrainian invasion)……

Wheat is 25% lower (remember how the lack of Ukrainian wheat was going to send prices higher ‘forever’?)

Aluminium is 24% lower

European delivered (Dutch TTF) Natural Gas has slumped 55%

Palladium has declined (Russia has 40% of the global reserves)

Crude Oil is 18% weaker

the Japanese Korean LNG Marker has fallen 54%

Lumber has swooned 34%

Nickel has tanked 50% from its March intraday high

and Hot Rolled Coiled Steel is 20% lower than its September 2021 high.

Interestingly, the Baltic Dry Index has ‘only’ risen 20% since the early March news of supply disruptions and port chaos in Shanghai arose.

May 5, 2022

by Rob Zdravevski

rob@karriasset.com.au

Rate hikes are hardly a ‘surprise’

Be careful subscribing to financial media framing recent central bank hikes as being a ‘surprise’.

As the charts below illustrates, the 2 year bond yields have already factored in a rise in interest rates.

I expect these government yields to fall in the coming months as they converge towards the central banks respective cash or benchmark rates.

May 5, 2022
by Rob Zdravevski
rob@karriasset.com.au

Macro Extremes (week ending April 29, 2022)

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)

Istanbul’s BIST Index

Overbought (RSI > 70)

Australian 2, 3, 5 & 10 year government bond yields

Canadian, Spanish, French, Greek, British, Italian, Korean, Swedish, Portuguese, New Zealand & Swiss 10 year government bond yields

German 2, 5 and 10 year yields

U.S. 2, 5 & 10 year yields

TBX & TBT

CRB (Commodities) Index

Corn

Rice

Cotton

Orange Juice

AUD/JPY

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

U.S. Dollar Index (DXY)

Heating Oil

USD/JPY

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

Cattle

NZD/USD

SGD/USD

Taiwan’s Taiex index



Oversold (RSI < 30)

TLT

IEF

China’s CSI 300

JPY/AUD

HKD/USD

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

FXE

GBP/USD

EUR/USD

CNH/USD

KRW/USD

Shanghai Composite



Notes & Ideas:

This past week’s big news remains the same. Bonds and Currencies.

Other observations include;

UK Gilts aren’t overbought anymore,

Bitcoin has broken a support line,

The Copper/Gold Ratio closed the week (it’s lowest weekly close since January 24th) at an important support line. (In Monday’s trade, it has broken below this),

The Japan/Korean LNG Marker is at its lowest price since February 14th,

We saw a bearish outside reversal week in the AUD/GBP,

The Euro has reached its most oversold level (on a monthly basis, not my usual weekly timeframe) since 2015,

The AUD/JPY is not overbought anymore,

while the AUD/USD flaunting is support line,

The mean reversion of those FAANGM’s has reached halftime.

There are places to hide, the CAC only fell 0.7% for the week, Italy’s MIB and Singapore’s Strait Times Index declined a mere 0.1%, the Nikkei was down 0.9% and the ASX 200 barely eased 0.5%,

A 13.3% swoon in the Nasdaq 100 over the past 4 weeks and it’s still not oversold.

Natural Gas recovered last week’s decline of 11%, 

the price of Urea slumped 19%

and Precious Metals fell while major equities indices did the same. Last week’s edition of ‘Macro Extremes’ signalled this citing their bearish outside reversal price action.

The larger advancers over the past week comprised of; 

Baltic Dry Index 4.2% (adding to last week’s 8% rise), Heating Oil 21.4%, Australian Coal 11.4%, WTI Crude Oil 2.6%, U.S. Dollar Index 2.1%, Gasoil 9.7%, Gold Volatility Index 4.5%, Natural Gas 10.9%, Orange Juice 2.5%, Gasoline 4.2%, Cotton 7.2%, Dutch TTF Gas 4.8%, Corn 2.6%, Rice 5.6%, HSCEI 4.7%, Hang Seng 9.5%, Russia’s MOEX 9.5%.

The group of decliners included;

Aluminium (4.8%), Rotterdam Coal (20.4%), Lean Hogs (9.8%), Copper (3.8%), Hot Rolled Coil Steel (4.4%), JKM (3.8%), Coffee (2.2%), Lumber (2.2%), Cattle (6.9%), Tin (6.3%), Palladium (2.9%), Silver (4.9%), Urea (19.1%), Uranium (2.1%), Gold in USD (1.8%), Oats (9.5%), Wheat (1.8%), Bitcoin (3.8%), KBW Banking Index (5.2%), Dow Jones Industrials (2.5%), Bovespa (2.9%), S&P Midcap 400 (3.2%), Nasdaq (3.8%), Oslo (1.9%), Russell 2000 (4%), SOX (2.3%), S&P 500 (3.3%) and the Taiex fell 2.5%.

May 2, 2022

(written 2 days later than usual, better late than never)

by Rob Zdravevski

rob@karriasset.com.au  

Newmont nears target buying range

I wasn’t expecting anything resembling a 17% decline in Newmont Mining in only 6 trading days following the writing of this note below.

Newmont price to ease

NEM stock is now $72.60.

and that target I mentioned of $64-$68 (within ~ 9 months) may be seen sooner that I thought.

In fact, if a few more people throw away their stock in the coming week, then $68.50 makes for an interesting entry price, for a trade.

A bounce from $68.50 will also give those wishing to sell, a second chance.

If NEM breaks above $86.40, then the $90 mark should be an interim ‘lid’ on the stock.

Longer term mean reversion mentioned in the original post, still counts.

April 26, 2022

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending April 22, 2022)

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)

China Coal

Rice

Natural Gas

Orange Juice

Overbought (RSI > 70)

Australian 2, 3, 5 & 10 year government bond yields

Canadian, Spanish, French, Greek, British, Italian, Korean, Swedish, Portuguese, New Zealand & Swiss 10 year government bond yields

German 2, 5 and 10 year yields

U.S. 2, 5 & 10 year yields

U.S. Dollar Index (DXY)

TBX

CRB (Commodities) Index

Corn

AUD/JPY

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

TBT

Istanbul’s BIST equity index

USD/JPY

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

None



Oversold (RSI < 30)

TLT

IEF

China’s CSI 300

Shanghai Composite

JPY/AUD

HKD/USD

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

JPY/USD (for the 7th week)



Notes & Ideas:

This pst week’s big news is the same as the last 3 or 4 weeks: the bond market and their overbought status.

Moreover, we saw yields lurch 15-20 basis points higher in many 10 year bonds. Some example include Portugal’s 10’s moving from 1.85% to 2.00% or the U.S. 10’s moving from 2.82% to an intra-week high of 2.98%.

JGB’s made a new high, perhaps suggesting the ‘risk-on’ world is OK.

Precious Metals saw weakness and featured amongst the bearish reversals listed below.

Some currencies moved 2% which isn’t a range normally seen in a weekly term.

In other news, last week’s 26% rise in Natural Gas saw it give up 11% this week and commensurately, the JKM tanked 23%. Other energy commodities also fell while the price of Uranium took a break from its recently reported Overbought Extremes by falling 14%.

We saw constructive price action in the Copenhagen, Oslo & Helsinki equity indices, while the S&P 500 has fallen 6.2% and the Nasdaq 100 has declined 10.5% over the past 3 weeks.

And lastly, we saw bearish outside reversal week in Gold, Silver, Copper, Orange Juice, Platinum, the S&P 500, the Dow Jones Industrials, SOX, MIB, KBW Bank Index, Nasdaq, Russell 2000 and the SOX.

The larger advancers over the past week comprised of; 

Baltic Dry Index 8%, Heating Oil 2.2%, Lumber 14.4%, Rice 2.2%, EURAUD 2% and Dow Jones Transports rose 1.5%

The group of decliners included;

Australian Coal (3%), Bloomberg Commodity Index (2.6%), Cocoa (3.1%), China Coal (10.6%), WTI Crude Oil (4.6%), Gold (2.1%), Copper (3%), Japan Korean ‘LNG” Marker (22.6%), Natural gas (10.5%), Orange Juice (2.8%), Platinum (6.7%), Gasoline (2.2%), Rubber (1.6%), Sugar (4.1%), Silver (5.6%), Cotton (4.3%), CRB Index (2.5%), Brent Crude (4.5%), Uranium (13.7%), Oat (5.1%), Wheat (2%), AUDUSD (2%), NZDUSD (1.9%), CNHUSD (2.3%), JPYUSD (1.7%), ZARUSD (6.9%) and Australia’s ASX 200 fell 0.7%.

April 24, 2022

by Rob Zdravevski

rob@karriasset.com.au