rob zdravevski's blog

Macro Extremes (week ending January 17, 2025)

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) either registered an Overbought or Oversold reading and/or have traded more than 2.5 standard deviations above or below its rolling mean.

* denotes multiple week inclusion

Extremes above the Mean (at least 2.5 standard deviations)

Chilean and Japanese 2 year government bond yields

German and Japanese 5 year government bond yields

Austrian, Canadian, German, Danish, Spanish, French, Greek, Italian, Japanese, Dutch and Portuguese 10 year government bond yields

Australian 10 year minus Australian 2 year bond yield spread

U.S. 10 year minus U.S. 2 year bond yield spread

Bloomberg Commodity Index

Brent Crude Oil *

WTI Crude Oil *

Heating Oil *

Cattle

Natural Gas *

Gasoil *

Gasoline 

S&P GSCI Index

CRB Index

Corn *

CAD/GBP

Italy’s MIB Index

Chile’s IGPA Index

And the U.K.’s FTSE 100

Overbought (RSI > 70)

Brazilian 10 year government bond yield *

DXY Index *

Arabica Coffee *

Gold as priced in AUD, CAD, GBP and EUR

Austria’s ATX Index

Hungary’s BUX Index

Germany’s DAX Index

Pakistan’s KSE Index *

Czech Republic’s PX Index *

Israel’s TA35 *

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

Urea U.S. Gulf 

Extremes below the Mean (at least 2.5 standard deviations)

Belgian and Finnish 10 year government bond yields * 

Rotterdam Coal

Raw Sugar

Egypt 30 Index

KLSE

FTSE 250

And Thailand’s SET Index

Oversold (RSI < 30)

Chinese 10 year government bond yields * 

U.S. 3 month government bill yield *

Australian Coking Coal

Richards Bay Coal

Newcastle Coal *

North European Hot Rolled Coil Steel *

U.S. Midwest Hot Rolled Coil Steel *

Lithium Carbonate *

Lithium Hydroxide *

CAD/USD

EUR/USD

GBP/USD

RMB/USD *

DKK/USD *

INR/USD *

The Oversold Quinella (Both Oversold and Traded at < 2.5 standard deviations below the weekly mean)

None 

Notes & Ideas:

Government bond yields fell.

The Euro 10 year yield has risen for 6 weeks straight as has the US10/2 yield spread.

Spanish, French, Italian, Dutch and Portuguese 10 year bond yields have risen for 5 weeks. 

The U.S. 5 year bond minus the U.S. 3 month bill yield spread fell from overbought territory.

And the noise surrounding the heights in the British 30 year bond yield, resulted in it declining for the week.

Equities had a terrific week.

All the notable gainers appear in the ‘advancers’ list below.

Only a few Asian indices saw weakness. 

Copenhagen’s OMX25 was the rare decliner in western markets due to Novo Nordisk accounting for 12% of the index weighting.

The past week saw an overbought extreme for Britain’s FTSE 100 juxtaposed against the FTSE 250 registering an oversold extreme.

The Czech Republic’s PX Index has risen for 7 consecutive weeks and for 16 of the past 18 weeks.

Israel’s Tel Aviv 35 Index had climbed for 8 straight weeks and for 13 of the past 14.

The Regional Banks (KRE) Index broke it for 6 consecutive weeks of decline.

The DAX is at an all-time high.

The BUX, SMI, AEX, FTSE 100, Nasdaq Transports, IBEX and Norways OBX have risen for 4 weeks in a row.

The Nikkei 225 has fallen for the past 3 weeks.

While Chinese and Hong Kong equities recovered last weeks declines.

Commodity prices were mostly higher.

The 3 major commodity indices are overbought.

Aluminium is at its highest weekly close since April 2024.

Gasoline has climbed for 4 consecutive weeks.

Corn has risen for 6 of the past 7 weeks.

While Orange Juice is in a 4 week losing streak.

The few losers for the week included Platinum, Sugar, Lumber, Australian Coking Coal and the Baltic Dry Index.

Coal prices remain in oversold territory.

Gold as priced in CAD has risen for 7 consecutive weeks, while AUD Gold broke its 6 week winning streak.

Sugar has fallen for 13 of the past 15 weeks.

U.S.Midwest Hot Rolled Coil Steel has spent 34 weeks being oversold,

while Lithium Hydroxide has now lingered in weekly oversold territory for 85 consecutive weeks.

Currencies continue to provide much action.

Compared to last week’s list, many currencies have departed the oversold region.

Although, notably, there are still a few which are oversold compared to the USD.

The DXY (USD) Index remains in overbought territory,

The AUD was stronger except vs the JPY and ZAR 

and the Aussie broke its 6 week losing streak again the USD.

The Euro was mixed 

And the Yen was firmer.

The weakness in the Loonie continued as it touched a 22 year low versus the USD.

Oddly, the Canadian Dollar registered an overbought extreme against the British Pound.

While the Swiss broke its 5 weeks losing streak against the USD, its lowest weekly close since March 2023.

The larger advancers over the past week comprised of;

Richards Bay Coal 2%, Aluminium 5.4%, Rotterdam Coal 3.3%, Cocoa 5.7%, WTI Crude Oil 2.9%, Heating Oil 3.5%, JKM LNG in ¥ 1.8%, Newcastle Coal 4.1%, Nickel 2.3%, Gasoline 1.9%, Dutch TTF Gas 4.2%, CRB Index 1.7%, Gasoil 3.1%, Corn 2.9%, Oats 10.4%, Rice 2.4%, Shanghai Composite 2.3%, CSI 300 2.1%, All Developed World ex uSA 1.8%, AEX 2.7%, ATX 3.5%, KBW Banks 8.2%, BUX 3.8%, CAC 3.8%, China A50 2.3%, DAX 3.4%, DJ Industrials 3.7%, Dow Jones Transports 3.2%, MIB 3.4%, HSCEI 3.1%, Hang Seng 2.7%, IBEX 1.7%, BOVESPA 2.9%, IDX 1.8%, S&P SmallCap 600 4.3%, Russell 2000 4%, Nasdaq Composite 2.5%, KRE Regional Banks 8.2%, KSE 1.8%, FTSE 250 4.4%, S&P MidCap 400 4.5%, Nasdaq 100 2.9%, Helsinki 2.1%, Stockholm 3.7%, PX 2%, SA40 1.8%, SOX 5.4%, Chile 2.1%, S&P 500 2.9%, TA35 3.1%, FTSE 100 3.1%, WIG 1.8% and the ASX Materials Index rose 2.6%.  

The group of largest decliners from the week included;

Australian Coking Coal (2.2%), Baltic Dry Index (5.8%), Lean Hogs (1.7%), JKM LNG (2.2%), Lumber (2.1%), Platinum (3.1%), Cane Sugar (5.2%), Raw Sugar (2.1%), Gold in ZAR (1.5%), KLSE (2.2%), Nikkei 225 (1.9%), Copenhagen (2.1%), SET (2%) and Philippines PSE fell 2.2%.

January 19, 2025

By Rob Zdravevski

rob@karriasset.com.au