rob zdravevski's blog

Macro Extremes (week ending March 8, 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.

Extremes “above” the Mean (at least 2.5 standard deviations

U.S. 3 month bill yield

Russian 10 year bond yield

Rotterdam Coal

Cotton

Gold in GBP and ZAR

Overbought (RSI > 70)

Japanese 2 year bond yield

Cocoa

Robusta Coffee 

Rubber

FTSE All World (developed ex-USA) index

AEX

Budapest

CAC 30

DAX

Dow Jones Industrial Average

Italy’s MIB

KLSE

S&P MidCap 400

Nikkei 225

NIFTY 50

OMX Copenhagen

SENSEX 

Philadelphia Semiconductor Index (SOX)

Nasdaq Transportation Index

And the S&P 500 Index

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

Gold in AUD, CAD, JPY, EUR and USD

Egypt 30 Index

TAIEX

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

Wheat

Oversold (RSI < 30)

JKM LNG

Lithium Hydroxide

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

Chinese 10 year government bond yields

Notes & Ideas:

Government bond yields were lower with most of them using after their recent rise to their rolling weekly means.

All yields were lower, except for the Japanese, again.

The yield for the Japanese 2’s and 5’s are in their respective 8 and 5 week rising streaks.

The Chinese 10’s are the notable oversold extreme in this week’s list.

While the Chilean 10’s and German 2’s broke their 4 week winning (yield) run.

Equities were mostly higher with many continuing to appear in the list of overbought extremes.

The Shanghai Composite and the CSI 300 have put together a 4 week winning streak, the DAX is at 5 weeks, the Philippines main index has risen for 7 straight weeks while the S&P Midcaps have closed higher for 9 consecutive weeks. 

The Nasdaq Composite and Nasdaq 100 aren’t overbought anymore.

Mexico has fallen for 5 straight weeks.

Brazil’s BOVESPA has bucked the direction of most global bourses by falling 5.2% since its Christmas overbought reading.

Russia’s MOEX 10 closed at another all-time high.

Last week’s bullish outside reversal week for Copenhagen’s OMX 25 saw it follow through with a 2% rise.

The S&P 500 is still overbought. This week’s decline of 0.3% means it has only declined for 3 weeks of the past 19 weeks.

The CAC, the AEX and DAX resumed posting new all-time highs.

The Dow Jones Industrial Average has now spent the past 13 weeks in overbought territory.

The Philippines Stock Exchange has put together a 6 week winning streak.

Australia’s ASX 200 is nearing overbought levels.

And Italy’s MIB has traded to its highest point since May 2008.

Commodities were mixed.

The big news is that the price of Gold (in 5 major currencies) is in this week’s overbought quinella category.

Over the past 3 weeks, Gold in USD and AUD have risen 8% and 6.5% respectively.

So much, that Gold as priced in AUD is 24% above its 200 week moving average.

Coking Coal, Gas and Oils were weaker.

Raw Cane Sugar had a terrible week.

Grains, Precious Metals and Industrial Metals were firmer.

Corn and Soybeans are not oversold anymore. In fact, Soybeans have risen for the past 2 weeks after snapping their recent 10 week losing streak.

Cocoa has spent 20 weeks in overbought land.

The Copper/Gold ratio is nearing lower extremes.

Nickel has risen 12% in the past 4 weeks.

Uranium is in a 5 week losing streak.

Rotterdam Coal has risen 18% in the past fortnight.

The Baltic Dry Index has risen for 5 consecutive weeks.

Cattle broke its 9 week rising run.

And Lithium Hydroxide has now spent 35 consecutive weeks in weekly oversold territory.

Currencies saw a firmer Aussie, Yen and British Pound.

Although in a contest between two of these stronger currencies, the GBP fell for a 2nd week against the Yen, thus easing it away from its highest point since mid 2015.

The following AUD pairs saw them perform weekly bullish outside reversals, AUDINR, AUDUSD and the AUD CAD.

The Loonie was weaker, so much that the CAD/EUR is in a 4 week losing streak.

The Euro was also weaker against everyone except the USD.

The DXY Index lost 1.1% for the week

And the USDSEK has fallen for 5 straight weeks.

The larger advancers over the past week comprised of;

Rotterdam Coal 3.8%, Baltic Dry Index 6.5%, Hot Rolled Coil Steel 3.8%, JKM LNG 1.9%, Tin 2.3%, Nickel 2%, Palladium 6.5%, Platinum 3%, Robusta Coffee 4.4%, Silver 5.1%, Rubber 2.4%, Dutch TTF Gas 2.3%, Silver in AUD 3.5%, Gold in AUD 3.1%, Gold in CAD 4.1%, Gold in USD 4.6%, Corn 3.5%, Soybeans 2.8%, KBW Regional Banks 3%, Egypt 8.1%, IBEX 2.4%, Indonesia 2.3%, KRE Regional Banks 4.1%, S&P MidCap 400 1.5%, Copenhagen 1.9%, TAIEX 4.5% and the ASX 200 rose 1.3%.

The group of largest decliners from the week included;

Australian Coking Coal (2%), China Coking Coal (2%), WTI Crude (2.5%), Lean Hogs (3.8%), Heating Oil (2.6%), Lithium Hydroxide (7.2%), Natural Gas (1.6%), Gasoline (3.3%), Raw Cane Sugar (4.9%), Brent Crude (1.8%), Gasoil (2.9%), Urea Middle East (2.3%), Uranium (3%), Oats (2.4%), Rice (3.9%), Wheat (3.6%), Nasdaq Composite (1.2%), Chile (2.2%) and the Nasdaq 100 fell 1.6%.

March 10, 2024

by Rob Zdravevski

rob@karriasset.com.au

No bubbles in Non-U.S. equities

The FTSE Developed (ex USA) All World equity index has traded into weekly overbought territory for the first time in 3 years……

This index of non-U.S. equities is not yet ‘bubble-esque’.

It can grind higher as its upward trend has strength, but it’s not a bargain.

March 10, 2024

by Rob Zdravevski

rob@karriasset.com.au

#assetallocation

My March 2024 newsletter

My latest newsletter summarises my posts from over the past 2 months.

It saves you lots of reading and scrolling time.

https://mailchi.mp/karriasset/summarising-my-notes-over-the-past-2-months

There are forced buyers amongst us

Amongst those who manage equity portfolios, I’m sensing increasing pressure that they need to deploy capital for various reasons related to their ‘masters’ or mandates.

I’ve heard of forced sellers.

Sometimes we come across forced buyers.

Another case for lower interest rates

The orange line (Australian #inflation) is falling and catching up to the blue line (U.S. #naturalgas).

In a note dated June 29, 2023, I said so.

Inflation follows the Natural Gas price

The green line (#Australian 2 year government interest rates) should fall and catch to orange and blue.

March 3, 2024

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending March 1, 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.

Extremes “above” the Mean (at least 2.5 standard deviations

Rotterdam Coal

Cotton

Lumber

Overbought (RSI > 70)

Robusta Coffee 

Rubber

AEX

Budapest

DAX

Dow Jones Industrial Average

Italy’s MIB

Egypt 30 Index

Nasdaq Composite

Nasdaq 100

Nasdaq Transportation Index

NIFTY 50

Nikkei 225

Philadelphia Semiconductor Index (SOX)

TAIEX

Vietnam

And the S&P 500 Index

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

Cocoa (in U.S. and London)

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

None

Oversold (RSI < 30)

Chinese 10 year government bond yields

JKM LNG

Lithium Hydroxide

Corn 

Soybean

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

None

Notes & Ideas:

Government bond yields were mixed.

American and Australian Yields were lower,

While German Spanish, French, British, Japanese and South Korean yields rose.

Chilean yields rose with the 10 year yields and are in a 4 week winning streak 

German 2’s (yields) have also risen for the 4th consecutive week.

Equities were generally firmer although most closed the week within 1% either side of last week’s close. 

The Shanghai Composite is in a 3 week winning streak while the S&P Midcaps have closed higher for 7 consecutive weeks. 

The KSLE isn’t overbought anymore nor is the BIST 100.

The Hang Seng broke its 3 week winning run.

Mexico has fallen for 4 straight weeks.

Russia’s MOEX 10 has closed at an all-time high.

Copenhagen performed a bullish outside reversal week.

The S&P 500 is still overbought. It has risen for 16 of its past 18 weeks.

The CAC, the AEX and DAX took a break from posting made a new all-time highs.

The Dow Jones Industrial Average has now spent the past 12 weeks in overbought territory.

The Philippines Stock Exchange has put together a 6 week winning streak.

And Italy’s MIB has traded to its highest point since June 2008.

Commodities were mostly stronger, with the larger winners listed below.

The strength seen in the commodity indices were heavily influenced by the energy contracts.

Coal, Gasolines and Gases had a strong week.

Gold saw renewed strength while the PGM’s were weaker.

The Baltic Dry Index has risen for 4 consecutive weeks.

Dutch TTF Gas and JKM (priced in Yen) moved out of oversold territory.

Hot Rolled Coil Steel is nearing an extreme.

Orange Juice had a bearish outside week.

Cattle is streaking ahead, posting 9 consecutive winning weeks and closing higher in 11 of the past 12 weeks and nearing overbought territory.

Lithium Hydroxide has now spent 34 consecutive weeks in weekly oversold territory.

Soybeans and Corn are registering oversold extremes. 

Soybeans broke their 10 week losing streak.

And Henry Hub Natural Gas bounced 8% after making all-time lows, last week.

Currencies was were the action was.

AUD and CAD were mostly weaker.

The greater USD measure, the DXY was unchanged.

The Euro was firmer.

While the Yen rose for the week and it is flirting with making lower lows across various pairs.

The AUD/JPY took a break testing its recent highest closing point since December 8, 2014.

GBP/JPY is at its highest price since August 3, 2015.

The Japanese Yen has fallen for 7 of the past 8 weeks versus USD.

MYR/USD bounced from that all time low mentioned in last week edition.

And the Colombian Peso rose against the USD and broke its 8 week losing streak.

The larger advancers over the past week comprised of;

Aluminium 2.5%, Rotterdam Coal 14.5%, Bloomberg Commodity Index 1.9%, Baltic Dry Index 18.6%, WTI Crude Oil 4.6%, Cotton 2.2%, Heating Oil 1.8%, JKM LNG 2.2%, JKM in Yen 3.3%, Newcastle Coal 9%, Natural Gas 8.7%, Nickel on MCX 2.5%, Gasoline 4.2%, Robusta Coffee 2.9%, S&P GSCI 2.5%, CRB Index 2.3%, Dutch TTF Gas 11.9%, Brent Crude 2.1%, Gasoil 2.3%, Gold in AUD 2.9%, Gold in CAD 2.7%, Gold in USD 2.3%, Corn 2.4%, Oats 5%, DAX 1.8%, Russell 2000 2.8%, Nasdaq Composite 1.7%, Karachi 4%, S&P MidCap 400 1.9%, MOEX 4.4%, Nasdaq 100 2%, Nikkei 225 2.1%, SOX 6.8%, Chile 4.7%, Vietnam 3.8% and Australia’s ASX Small Caps rose 2.2%.

The group of largest decliners from the week included;

Australian Coking Coal (2.6%), China Coking Coal (2.7%), Hot Rolled Coil Steel (2%), Orange Juice (5.5%), Palladium (3.9%), Platinum (2.4%), Sugar (6.8%), Uranium (2.5%), Rice (1.7%), Wheat (2%), Mexico (2%), South Africa (2.1%), SET (2.2%), Strait Times (1.5%) and Turkiye’s BIST fell 3%

March 3, 2024

by Rob Zdravevski

rob@karriasset.com.au

U.S. bonds yields to fall to 2.8%

News of the poor management of the U.S. government’s income statement and balance sheet isn’t new.

https://www.bloomberg.com/news/articles/2024-02-29/pimco-sees-swelling-deficit-dragging-bonds-back-to-the-future?cmpid=BBD030124_MKT&utm_medium=email&utm_source=newsletter&utm_term=240301&utm_campaign=markets&sref=qLOW1ygh

Nor is the oft grouping of ‘money printing’ yet rates were below 1% not too long ago.

I say that the U.S. 2 year paper goes to 2.8% – 3.1% before it considers moving back higher,

And all the other capital market effects that would come with that…….

I expect U.S. rates to move to where they can do the most damage.

March 2, 2024

by Rob Zdravevski

rob@karriasset.com.au