rob zdravevski's blog

Macro Extremes (week ending May 17, 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)

Copper/Gold Ratio

Nickel

Platinum

Wheat 

AUD/CAD

AUD/JPY

HKD/USD

Hang Seng Index *

S&P Small Cap 600

Helsinki *

And Switzerland’s SMI

Overbought (RSI > 70)

Russian 10 year government bond yield *

Japanese 2 and 5 year government bond yield * 

Silver in AUD

Gold in CAD, CHF, EUR, GBP & USD *

AEX *

Austria’s ATX *

Budapest *

DAX *

MIB *

MOEX

Malaysia’s KLSE *

Pakistan’s KSE Index *

Oslo *

Russell 2000

South Africa 40 *

TAEIX *

TSX

FTSE 100

and Turkiye’s BIST 100 *

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

Copper *

Orange Juice

Silver in USD

Hang Seng China Enterprises Index (HSCEI) *

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

USD/ZAR

Oversold (RSI < 30)

Cotton

Lithium Hydroxide *

Lumber *

North European Hot Rolled Coil Steel *

Urea (Middle East)

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

None

Notes & Ideas:

Government bond yields were lower.

Amongst the week’s relative quiet action, the Copper/Gold Ratio entered overbought terrority which tends to coincide with bonds yields peaking.

Equities were higher again.

The FTSE 100 switches places in oversold land with the FTSE 250.

The American Russell 2000 and S&P SmallCap 600 return to being overbought as has Toronto’s TSX.

Many European indices remain overbought as some of the China and Hong Kong indices.

The HSCEI and Hang Seng have both risen 19% in the past 4 weeks.

The All Word Developed (ex USA) Index is in a 4 week winning streak as it the Dow Jones Industrials and the Nasdaq Composite.

And Italys MIB made an all-time high.

Commodities were mostly stronger.

Coal, Cocoa, Lumber, Sugar, Oats and Grains were weaker.

Metals (Precious and Base), Gases, Oil, Coffee, Cattle and Orange Juice were stronger.

Platinum, Nickel and Orange Juice make a return visit to overbought territory.

Oats are no longer oversold as they broke their 5 week winning streak falling 11% for the week (whilst performing a weekly outside bearish reversal), giving up nearly half of their 26.5% return over that time.

Copper, Silver and Gold are overbought, while Hot Rolled Coil Steel, Lumber and Cotton and Lithium are in the oversold category. 

Lumber has tanked 22% over the past 8 weeks and Cotton has slumped for 11 consecutive weeks.

Most grains eased following 4 weeks of consecutive gains.

Over the past 3 weeks, Platinum has risen 17%.

The Baltic Dry Index fell 13%, giving up half of the 23% gain seen in the prior fortnight.

And Lithium Hydroxide has now spent 44 consecutive weeks in weekly oversold territory.

Currencies saw some action during the week.

The AUD was stronger and as some pairs return to be ing overbought.

And interestingly, the CHF/AUD is nearing overbought territory.

The larger advancers over the past week comprised of;

Aluminium 1.8%, Bloomberg Commodity Index 2.9%, WTI Crude Oil 2.3%, Copper 8.3%, Heating Oil 2.1%, JKM LNG 4.5%, Coffee 2.7%, Cattle 2.7%, JKM LNG in Yen 1.8%, Tin 2.4%, LME Aluminium 3.6%, Natural Gas 16.6%, Nickel 11.9%, Nickel on MCX 3.2%, Orange Juice 13.8%, Palladium 3%, Platinum 8.2%, Gasoline 2.7%, Robusta Coffee 2.3%, Dutch TTF Gas 2.5%, Silver in AUD 10.3%, Silver in USD 11.8%, Gold in CAD 1.9%, Gold in CHF 2.6%, Gold in USD 2.3%, ASX 200 1.7%, MIB 2.1%, HSCEI 3.2%, HSO 3.1%, IBEX 2%, IDX 2.5%, Russell 2000 1.9%, Nasdaq Composite 2.1%, KSE 3.1%, Nasdaq Biotech 2.4%, Nikkei 225 2.1%, Copenhagen 2.7%, SENSEX 1.7%, SMI 2.4%, SOX 3.6%, S&P 500 1.5%, TAEIX 2.7%, Vietnam 2.3%, ASX Materials 2.5% and BIST rose 4.2%.

The group of largest decliners from the week included;

Australian Coking Coal (2.5%) Rotterdam Coal (1.8%), Baltic Dry Index (13.4%), Cocoa (17.4%), China Coking Coal (2.3%), Cotton (1.8%), Lean Hogs (1.9%), Lumber (1.7%), Sugar (6.1%), Corn (3.7%), Oats (11.1%), Rice (3.2%), Wheat (1.9%), Budapest (1.6%) and the ASX Industrials fell 1.8%.

May 19, 2024

by Rob Zdravevski

rob@karriasset.com.au