rob zdravevski's blog

Macro Extremes (week ending July 5, 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)

U.S. 10 year minus U.S. 5 year government bond yield spread

KOSPI

Singapore’s Strait Times Index

Overbought (RSI > 70)

Biodiesel *

Robusta Coffee

AUD/JPY

EUR/JPY

GBP/JPY *

USD/JPY

Netherlands AEX *

Hungary’s BUX *

Pakistan’s KSE *

Nasdaq Composite * 

Nasdaq 100 *

Philadelphia Semiconductor Index (SOX)

S&P 500 *

Turkiye’s BIST 100

and Taiwan’s TAEIX *

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

NIFTY *

SENSEX *

Extremes below the Mean (at least 2.5 standard deviations)

Shanghai Composite Index

China’s CSI 300 Index

Oversold (RSI < 30)

Cotton

North European Hot Rolled Coil Steel *

U.S. Midwest Hot Rolled Coil Steel *

Lumber *

Lithium Hydroxide *

Corn *

And the Chinese RMB *

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

None

Notes & Ideas:

Government bond yields changed course and fell,

Except for the German, Swedish, Norwegian, Swiss and Polish 10’s, along with the Euro curve.

In fact, the Swiss 10’s yield broke their 4 consecutive weeks of decline. 

Furthermore, all of the bond yields and spreads which appeared last week are no longer so.

Against the yield trend, the Copper/Gold ratio bounced,

And the U.S. 2’s and 5’s yield had bearish outside reversal weeks.

Equities saw strength, again…..again….mostly !

For example, the Nasdaq Composite has risen for 10 out of the past 11 weeks, so much so to render it trading at 36% above its 200 week moving average.

China’s CSI 300 and Shanghai Composite have fallen for 7 consecutive weeks, while the KOSPI has risen for 5 straight weeks

Chile’s IGPA broke its 5 weeks of declines and Thailand’s SET broke its 6 week losing streak

Indonesia’s main index has climbed 8.2% over the past 3 weeks.

And the FTSE 250 and Vietnam’s VN Index both had bullish outside reversal weeks.

Commodities were mostly firmer, which is a change against the past weeks of weaker bias.

Coking Coal, Copper, Oil and Distillates, Tin, Precious Metals Orange Juice and Coffee featured amongst those who had a terrific week.

Gases, Urea, Rice and Lithium were the biggest losers for the week.

WTI Crude, Brent Crude, Heating Oil and Gasoline are in a 4 week winning streak.

Lean Hogs have slumped for 9 of the past 11 weeks, falling 14% over that time.

Lumber and Natural Gas (NG) prices have fallen for 4 consecutive weeks.  NG has posted a 26% loss during this streak.

The Copper/Gold Ratio bounced out of its 6 week losing streak.

Palladium has risen 15% over the past 3 weeks.

Soybeans and Wheat both broke their 5 straight weeks of declines.

Lumber has fallen for 11 weeks of the past 15 weeks.

And Lithium Hydroxide has now spent 51 consecutive weeks in weekly oversold territory.

Currencies continue to provide action, again and again.

Many currencies no longer appearing in extreme categories.

The AUD has risen for 4 consecutive weeks against the JPY, EUR, CAD, SGD, THB and USD.

The CAD/AUD has fallen for 4 weeks, while the Loonie against the USD has climbed for 4 straight weeks.

The U.S. Dollar (DXY Index) fell 1%, breaking its 4 week winning streak.

The Euro was mixed

The British Pound was stronger in a week when the United Kingdom held a general election.

And the Yen was weak, again.

The larger advancers over the past week comprised of;

Australian Coking Coal 7.6%, China Coking Coal 7.5%, WTI Crude Oil 2%, Copper 5.9%, Heating Oil 2.7%, Tin 3.3%, Newcastle Coal 2.8%, Orange Juice 4.9%, Palladium 6.3%, Platinum 3.2%, Robusta Coffee 4.3%, SPGSCI 1.5%, Brent Crude Oil 2.3%, Gasoil 2.8%, Silver in AUD 5.9%, Silver in USD 7.1%, Gold in CAD and CHF 2.5%, Gold in USD 2.8%, Gold in ZAR 3.1%, Soybean 2.3%, Wheat 3%, All World ex USA 2.1%, ATX 2.8%, CAC 2.6%, Egypt 2.2%, MIB 2.5%, BOVESPA 1.9%, IDX 2.1%, Nasdaq Composite 3.5%, KOSPI 2.3%, FTSE 250 2.5%, Nasdaq 100 3.6%, Nikkei 225 3.4%, SOX 3.4%, S&P 500 2%, STI 2.3%, TAIEX 2.3%, Vietnam 3%, ASX Materials 3.3%, BIST 1.9% and Israel’s TA25 rose 2.1%.  

The group of largest decliners from the week included;

Baltic Dry Index (4.1%), Cotton (2.4%), Lithium (3.6%), Natural Gas (10.8%), Dutch TTF Gas (4.1%),Urea U.S. Gulf (4.2%), Rice (5.4%), and the KRE Regional Banks Index fell 2.4%.

July 7, 2024

by Rob Zdravevski

rob@karriasset.com.au