A decline without ‘strength’ may be short lived

The downward trend in many stocks which I either watch or own has been weak.

My medium-term indicators show that the decline has not occurred with ‘strength’.

Thus, it suggests the lower prices seen over the past 4-5 weeks is a ‘spike’, rather than a sustained trend.

So, I’m watching if the ‘strength’ increases.

For now, it hasn’t.

Without ‘strength’, the downward trend may fade.

by Rob Zdravevski

June 19, 2022

rob@karriasset.com.au

Macro Extremes (week ending June 17, 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)

Chinese 10 year Government Bond Yields

EUR/GBP

Dow Jones Industrial Average

Copenhagen’s OMX 25 Index

Philadelphia Semiconductor (SOX) Index

Singapore’s Strait Times Index

Nasdaq Transports Index

Overbought (RSI > 70)

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

TBT & TBX

U.S. Dollar (DXY) Index

USD/JPY

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

U.S. 2, 5 & 10 year government bond yields

British, Canadian, Swiss, Spanish, French, Greek, Italian & Japanese 10 year government bond year yields

German 2, 5 & 10 year government bond yields

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

Copper/Gold Ratio



Oversold (RSI < 30)

CAD/USD

JPY/USD

KRW/USD

GBP/USD

IDR/USD

TLT & IEF

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

US 10 year minus Australia 10 year government bond yields

Bitcoin and GBTC

Amsterdam’s AEX

S&P Midcap 400

Russell 2000

SMI

S&P 500

ASX 200

Toronto’s TSX

KOSPI

And the S&P 500 Small Cap 600

Notes & Ideas:

This week’s biggest news was seeing government bond yields register my Overbought Quinella of registering a weekly RSI above 70 and trading to 2.5 standard deviations above its weekly mean.

The Japanese 10 year yield surged into what seems like a crescendo of 0.45%. It settled the week at 0.40%.

In fact, we saw many surges intra-week in bond yields. The U.S. 10 year touched a high of 3.50% to then close the week at 3.23%.

A more notable observation in this bond yield surge is that the listed bond ETF’s which represent the long and short of the bond market (they carry the codes of IEF, TLT, TBT and TBX respectively) traded to Monthly Quinella’s of extremes. 

Another group in that category, but on the Oversold side of the ‘extremes’ are a host of equity indices.

BUT, can you believe in a week of carnage amongst equites, the Nasdaq 100 rose 1.2% for the week. Incidentally, the Nasdaq Composite fell 4.7%.

Is there some support and strength in the ‘leaders’?

We also saw outside bearish reversal weeks from assets and securities such as the Bloomberg Commodities Index and WTI Crude Oil. These are some of the names which were Overbought over the past couple weeks.

In price action news, I expect Lean Hogs to trade up to $120 and the S&P Midcap 400 closed on its weekly lows, unlike the U.S. 10 year bond yield.

(i.e. Monday may offer a good opportunity to get set)

The U.S. biotech index closed up 0.06%. Perhaps some rotational resilience for a bludgeoned sector.

And finally, Energy isn’t overbought anymore as Oil and Natural Gas tanked following weeks being Overbought.

Natural Gas has fallen 27% since my “Sell” call 11 days ago at $9.50, where I called it the ‘mother of all peaks’.

It’s now $6.95

While, the other Gas (LNG) spiked 46% for the week.

Readers may find referencing my previous 2-4 editions “Macro Extremes” useful, as comments within are still relevant.

The larger advancers over the past week comprised of; 

Australian Coal 2.5%, Rotterdam Coal 5.5%, Baltic Dry Index 11.1%, Gasoil 1%, Hogs 3%, JKM 46.6%, Lumber 2.5%, Dutch TTF 42.8%, oats 2%, Rice 2.2%, Shanghai Composite 1%, CSI 300 1.7%, Nasdaq 100 1.2%.

The group of decliners included;

Aluminium (6.7%), Bloomberg Commodity Index (6.4%), WTI Crude (10.5), Gold (1.9%), Copper (6.5%), HRC (2.9%), Tin (12.8%), Natural Gas (21.5%), Nickel (6.2%), Palladium (5.7%), Platinum (4.2%), Gasoline (9.1%), Silver (1.6%), CRB Index (5.1%), Brent Crude Oil (7.1%), Uranium (7.4%), Soybeans (7.1%), Wheat (2.2%), Urea (2.8%), Bitcoin (27.5%), Ethereum (30%), AEX (6.8%), KBW Banking Index (4.6%), CAC (4.9%), DAX (4.6%), Dow Jones Industrial Average (5%), DJ Transports (3.7%), MIB (3.4%), HSCEI (3.2%), Hang Seng (3.4%), IBEX (2.9%), Bovespa (5.4%), S&P Midcap 400 (7.8%), Nasdaq Composite (4.6%),  Nikkei (6.7%), Sensex (5.4%), Oslo (3%), Copenhagen (5.8%), Helsinki (3.6%), Stockholm (5.4%), SMI (5.7%), SOX (9%), S&P 500 (6.1%), STI (2.6%), S&P Midcap 600 (7.8%), TAIEX (5%), Nasdaq Transports (6.2%), FTSE 100 (4.1%), TSX (6.6%), Russell 2000 (7.5%), S&P Smallcap 600 (7.9%) and Australia’s ASX 200 fell 6.6% (adding to last week’s 4.2% decline.

As you can see, there wasn’t may many places to hide.

June 18, 2022

by Rob Zdravevski

rob@karriasset.com.au  

South Korea’s KOSPI is giving buy signals

Carrying today’s writing theme of the Trifecta of where prices are seeing a Weekly Oversold reading, touching its 200 week moving average and trading at 2.5 standard deviations below its rolling weekly mean……..

the chart below shows circles where South Korea’s Kospi has done so and bodes well as moments to accumulate, should your investment time horizon be longer than 8 minutes.

Although, this is hardly surprising given that its largest company by market capitalisation is also sending the same signals following its 26% decline over the past 52 weeks.

The ‘window’ to sell can see seen at the opposite end of the pendulum.

This week, we are in an accumulating ‘window’.

And, the South Korean Won is at a 13 year low, making their products much more competitive.

I can’t imagine the United States imposing any onerous import tariffs to combat this, either.

Especially following President Biden’s trade and security visit to South Korea only last month, in May 2022

June 16, 2022

by Rob Zdravevski

rob@karriasset.com.au

The ASX 200 is nearly there too

The trifecta of a Weekly Oversold reading, touching its 200 week moving average and trading at 2.5 standard deviations below its rolling weekly mean…….is near.

A 1% decline in the ASX 200 down to the 6,655 level would see these indicators align.

This is not an exercise of calling an exact low….Jeez !

It’s an illustration to suggest that the probability of a trough is close by.

Whilst this comment is about the whole index, as a stockpicker I think the ‘internals’ of the ASX 200 will see a rotation of monies from commodity related stocks into the unloved stocks within the retail, banking and building materials sectors.

June 16, 2022

by Rob Zdravevski

rob@karriasset.com.au

Identifying moments to Buy, not Sell

Other markets are now venturing towards their lower ‘extreme’.

Switzerland’s SMI equities index is doing that now.

Today’s trading at 10,448 renders it (on a weekly basis) Oversold, touching its 200 week moving average and trading at 2.5 standard deviations below its rolling weekly mean.

Making it more attractive is that the Swissie is trading at the lower end of of its multi-year range.

I’m posturing towards being a buyer, rather than a seller.

Last August and December of 2021 was when you the contemplation of selling should’ve taken place.

June 16, 2022

by Rob Zdravevski

rob@karriasset.com.au

Gold to Oil ratio is telling a different story

The Gold to Oil ratio is at its lowest since November 2014.

That aside, whenever this ratio falls (especially below its long term average) the S&P 500 rises.

It tells us the health of the economy is OK.

Whenever it rises, the S&P 500 is stifled and often declines.

Today, there is anomaly.

The debate I’ll work through in figuring out this distortion is…..we have higher oil prices which may not be due to more demand, but rather less supply and gold isn’t acting in a historical manner when inflation appears.

And then, on the healthy part of the economy side of the ledger, we continue to see solid and rising S&P 500 consensus earnings estimates.

June 14, 2022

by Rob Zdravevski

rob@karriasset.com.au

Check your pockets

There are pockets in equities markets where stocks are making ‘rare’ and extremes moves.

Often these downdrafts coincide with ‘weaker hands’ throwing away their shares (at the wrong time) which is also when price declines are exacerbated by machines and money managers playing a short game of protecting their bonuses.

The example below, shows ANZ Bank (ANZ.ASX) and Wesfarmers (WES.ASX) both trading to 3 standard deviations and reaching Oversold levels on a Weekly basis.

Over many years, this simultaneous event doesn’t happen too often.

At these moments, it has been my experience when professional investors look to accumulate rather than sell.

In other words, observe where the pendulum’s arc is.

I’m expecting a rotation of monies into such opportunities and occurrences.

June 14, 2022

by Rob Zdravevski

rob@karriasset.com.au

S&P 500 has nearly mean reverted

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

It’s closer to buying time than selling

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

Finally, Bitcoin closing in on $22,000

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

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