rob zdravevski's blog

Macro Extremes (week ending August 16, 2024)

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)

Belgian and Danish 10 year government bond yields *

Gold Volatility Index *

CNH/USD *

EUR/USD *

THB/USD *

Brazil’s Bovespa

Overbought (RSI > 70)

Robusta Coffee

Gold as priced in AUD, CAD, EUR and GBP.

NIFTY

ASX Financials Index

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

Gold in USD

MYR/USD *

Extremes below the Mean (at least 2.5 standard deviations)

Australian 3, 5 & 10 year bond yields

10 year Chilean, Spanish and Portuguese government bond yields.

Sugar No. 16

USD/IDR

ASX Materials Index

DXY (USD) Index

Oversold (RSI < 30)

Cotton *

North European Hot Rolled Coil Steel *

U.S. Midwest Hot Rolled Coil Steel *

Shanghai Rebar *

Lithium Hydroxide *

Corn *

Soybeans *

MOEX

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

Australian Coking Coal

USD/SGD

Notes & Ideas:

Global government bond yields fell.

The exception were Swiss, German, French, Norwegian yields along with shorter duration British paper and the the whole of the Japanese curve.

Many yields have left the oversold category this week with the remnants at the bottom end of their travels telling me that we should soon to see them reverse higher, at least back to their mid-point.

Rising yields will put pressure on any advance for ‘risk’ assets.

The Copper/Gold ratio broke its 5 week losing streak.

The Chilean yield streaks continue. The 2 year yield has risen for 9 straight weeks while the 10 year yield has fallen for 7 consecutive weeks.

Equities ripped higher.

The whole list of those invoices which rose 1.8% or greater are listed below.

All of those listed in last weeks list as being oversold, are no longer so.

Brazil’s BOVESPA and the SOX compounded last week’s gains.

The former is appearing in an overbought extreme category this week.

Australia’s Financials Index revisits overbought territory.

Inversely, the ASX Materials Index is in a 6 week losing streak and has registered an oversold entry.

The KOSPI broke its 5 week losing streak.

And the Nikkei 225 broke its 4 week streak of declines rising 9% and making up half of the 17% decline seen in the prior 4 weeks.

Commodities were mixed, again,

The list of winners and losers explains.

Precious metals had a good week with Gold in various prices appearing in the overbought section of this weeks list.

Unloved Coking Coal prices trying to find a floor.

Copper made up for last weeks loses and broke its 5 week losing streak.

Grains continue to suffer and fall.

Soybeans have fallen 7% in the past 3 weeks and tanked 22% over the past 3 months.

Corn prices have performed similarly.

All things steel related are in a trough.

And Lithium Hydroxide has now spent 57 consecutive weeks in weekly oversold territory.

Currencies were quiet for a change.

The Aussie rose again except for the AUD/IDR cross which is in a 6 week losing streak.

The Loonie fell

The DXY is in a 4 week losing streak. The weakness in the USD keeps in oversold territory.

The Euro was mixed while the EUR/GBP broke its 4 week winding streak.

Inversely, the GBP broke its 4 & 5 week losing streak versus the USD and the Yen, respectively.

The larger advancers over the past week comprised of;

China Coking Coal 5.2%, Copper 3.8%, JKM 3.4%, Coffee 6%,  Tin 4.5%, Aluminium 2.9%, Orange Juice 8.2%, Palladium 5.3%, Platinum 3.5%, Robusta Coffee 7.8%, Silver in AUD 4.2%, Silver in USD 5.8%, Gold in AUD 1.7%, Gold in CAD 2.8%, Gold in CHF 3.3%, Gold in EUR 2.1%, Gold in USD 3.1%, All Developed World ex USA 4%, AEX 2.5%, ATX 1.9%, KBW Bank Index 3.9%, CAC 2.5%, DAX 3.4%, DJ Industrials 2.9%, DJ Transports 2.2%, Egypt 3.1%, MIB 4%, HSCEI 2.4%, Hang Seng 2%, IBEX 2.9%, Bovespa 2.6%, Indonesia 3.1%, S&P SmallCap 600 2.6%, Russell 2000 3.1%, TAIEX 4.1%, Nasdaq Composite 5.3%, KLSE 1.8%, KRE Regional Banks 3.9%, KOSPI 4.2%, FTSE 250 2.1%, Mexico 2%, Nasdaq Biotechs 1.9%, Nasdaq 100 5.4%, Nikkei 225 8.7%, Oslo 2.1%, Helsinki 2.4%, Stockholm 3%, PSE 3%, SA40 2.7%, SMI 2.7%, SOX 9.8%, Chile 2%, S&P MidCap 400 2.7%, S&P 500 3.9%, STI 2.8%, TA35 2.5%, TSX 3.3%, FTSE 1.8%, Vietnam 2.3%, WIG 6.4%, ASX Financials 4.8%, ASX 200 2.5%, ASX Industrials 3.7% and the ASX SmallCaps rose 3.3%.

The group of largest decliners from the week included;

Cocoa (4.1%), Hot Rolled Coil Steel (3.5%), Lithium Carbonate (2.6%), Lithium Hydroxide (2.7%), Gasoline (3.6%), Sugar (2.4%), Sugar No. 16 (8.1%), Iron China (China) (3.4%), Dutch TTF Gas (1.9%), Urea Middle East (1.8%), Corn (1.7%), Oats (1.6%), Rice (1.8%), Soybeans (4.5%) and Wheat fell 2.3%.

August 17, 2024

by Rob Zdravevski

rob@karriasset.com.au

Using capital effectively

I think that some publicly listed companies should use the monies spared from their newly reduced capex plans……and buy their own shares, while their prices are languishing.

If they don’t (in the absence of making an acquisition) they are telling me that they don’t believe in their own equity.

August 14, 2024

Funds Management Industry is feeding you BS

One reason why I keep saying it is a dangerous equity market….

is because of the increasing marketing that I see from the funds management industry telling me how they are on a quest for ‘quality stocks’.

Hmmm……so prior to this declaration, have they have been peddling or investment peoples money in ideas which are rubbish and of low quality?

But now that the party is getting late and some are getting the yips…..perhaps they can go searching for ‘quality’ when stock market is trading toward the upper end of the pendulums arc and invariably ‘quality’ is seldom trading at cheap valuations.

Hey fund managers….your messaging is terrible and dubious.

Maybe their marketing should say, “well, you see we speculated for a while and it worked but we better move money into more recognisable ‘names’ and larger companies, in case that share prices decline, at least we can say we were investing in quality companies”.

My marketing currently says, in the absence of finding a bargain, I’ll hold cash until I find something of value to buy and own.

But ‘they’ can’t say that.

They have indexes to hug, jobs to keep, gravy trains to stay aboard, peers to mimic and fees to charge, all whilst being fully invested……no matter what !

I think that there is value to be found but ‘they’ cant be bothered looking for it or ‘their’ mandate doesn’t allow it or ‘they’ manage so much money that they can’t possibly buy enough of the asset to satisfy their size.

Many continue to be willingly fed BS.

August 13, 2024

Not all commodities dance to the same tune

If I think Glencore’s stock price can trade a further 28% below today’s level, (down to 289p) is this an analogy for the S&P GSCI Index and the price of Copper?

That may equate to a copper price somewhere near US$3.05

The weekly chart below overlays the prices of all three.

However, my view on commodities is bifurcated.

There are some which I am currently constructively bullish on.

August 9, 2024

by Rob Zdravevski

rob@karriasset.com.au