rob zdravevski's blog

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;

Kneading the dough

Where’s The Beef?

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

Whoa…back it up

Dimon’s backpedaling is not a surprise.

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

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 of your bread is buttered’.

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

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

Ya gotta know when to walk away

This price chart is an example where you should take profits or ‘manage’ your position.

The stock was a nice performer for our client portfolios in the last part of 2021. In the first quarter of 2022, I trimmed the holding (I thought it was quite prudent to adjust my weighting once the stock doubled) and eventually exited completely.

I thought the stock was fully valued and amongst other considerations I wasn’t a buyer at those new improved levels.

But there was a problem…..

Some investors were a little irritated that I was ‘becoming a ‘trader’ rather than a longer term investor. As I was suggesting we take profits within a 12 month window, this meant some investors faced a taxable ‘short-term’ gain.

When cash is earning you less than 1% and a stock doubles in a very short period of time (perhaps capitalising 3 years of earnings growth within a 7 month period of stock performance)……..you take the profit.

Otherwise, the ‘market’ has its own profound way of solving your tax problem.

Behold………the stock has halved.

Buyers from a year ago, no longer have a tax problem.

I feel a Kenny Rogers song coming on.

November 24, 2021

by Rob Zdravevski

rob@karriasset.com.au