rob zdravevski's blog

SOX enters a new atmosphere

The #PhiladelphiaSemiconductorIndex leaves the #Stratosphere and enters the #Mesosphere.

Here is the latest percentage that the #sox is trading above its 200 week moving average.

Convergence means that ‘ground zero’ doesn’t apply but the law of gravity does.

January 20, 2024

by Rob Zdravevski

rob@karriasset.com.au

Mining is difficult

While I prepare for a capital expenditure led cycle which will aide the case for higher commodity prices, positioning your investments for such a ‘theme’ won’t be as simple as owning equity in any or many mining companies.

The hoo-ha that we heard about the price of #gold hitting new highs through the month of December 2023 seems now muted.

Today is an example of the risks involved with mining production when combined with the market’s (or analysts) expectation of valuation.

Australia’s Evolution Mining and Canada’s Barrick Gold Corporation both reported their quarterly mining production and their stock prices fell 20% and 9% respectively.

We also saw some commensurate declines amongst some peers.

January 17, 2024

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending January 12, 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

KLSE – the Kuala Lumper Stock Exchange

Nikkei 225

Overbought (RSI > 70)

Cocoa

And India’s NIFTY and SENSEX equity indices

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

SHY – U.S. 1-3 year bond ETF

Uranium

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

Soybeans

Oversold (RSI < 30)

Nickel on India’s MCX Exchange

Nickel on LME

CSI 300

Lithium Hydroxide

JKM LNG

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

China 10 year government bond yields

Corn

Notes & Ideas:

Government bond yields fell for the week, giving up some of the previous week’s rise.

Although, it was generally a quiet week, the arrest moves were seen in the tanking of yields amongst the Japanese 2’s and 5’s.

Perhaps lost amongst many was that 2 weeks ago, Brazilian 10’s were at their lowest since August 2021.

And so, even with the recent bounce in yields, the first wave of declines seen since the September/October 2023 highs should be the first past of a larger mean reversion in bond yields.

Equities were mixed with many staying within 1% of last week’s closing prices.

If pressed, there was a slight bias towards weakness. The few that rose appear in this week’s list of movers.

The Nasdaq 100 rose 3.2% recovering the previous week’s 3.1% decline.

Volatile ? Perhaps but certainly we are seeing notable rates of change.

The last few editions listed the list of winning weekly streaks amongst various equity indices. They have all been broken. 

The last major intact streak is the 9 consecutive weeks of gains for the Nasdaq Biotechnology Index.

Indonesia’s main bourse has risen for 5 straight weeks.

Inversely, the HSCEI is at its lowest closing price since early November 2022.

The ASX Materials Index has sunk 5% in the past fortnight as has the Hang Seng China Enterprises Index (HSCEI).

Brazil’s BOVESPA and Mexico’s IPC have respectively fallen 2.5% and 3% over the past 2 weeks after being overbought 3 weeks prior.

The SOX rose 3%, recovering half of last week’s 6% slide. It isn’t at a new all-time high which it made a few weeks ago.

And while the S&P 500 continues to ‘act’ constructively, it’s ‘only’ 19% above its 200 week moving average.

Commodities were mostly weaker, albeit slightly.

The big movers were declines seen in shipping rates, metals and grains, again.

The winners included Uranium, Natural Gas, Lean Hogs and Cocoa.

Iron Ore isn’t overbought after falling 4.4% this past week.

The direction of the Copper/Gold Ratio is also back on my radar as this is a good indicator of the economy’s health.

Rotterdam Coal continues its see-saw. The last 3 weeks have seen it fall 8%, then rise 8% to falling 6.5% this past week.

Gold (as priced in Australian Dollars) is in a 4 week wining streak as is Natural Gas.

Natural Gas (Henry Hub) prices have risen 30% in the past 2 weeks, while the Dutch TTG Gas price fell 7% erasing the previous week’s 7% gain.

Soybeans and Corn are registering oversold extremes. 

Soybeans is in a 4 week losing real and has fallen 8 of the past 9 weeks.

While Corn is also nearing a major mean reversion. Some may recall my warnings of not chasing parabolic moves in grain prices at the commencement of the Ukraine invasion.

Cattle is still trading at extended percentages (33%) above its 200 week moving average.

Lithium Hydroxide has now spent 28 consecutive weeks in weekly oversold territory.

And Sugar’s rose again, climbing 5% in the past fortnight, following its recent oversold status, which it reached with consecutive weeks of declines.

Amongst currencies, the AUD has seen its 3rd consecutive week of declines against many pairs, which sits proportionally within my published note on December 29, 2023 that the AUD was ‘full’.

Now, AUD/USD is full

Once again, there aren’t any currencies trading at ‘extremes’. The previous weeks featured those which were.

The USD was broadly flat.

CAD was mainly weaker.

The CHF/AUD is in a 4 week winning streak.

The Euro was mixed, within small percentages of either side of being ‘flat’.

While the Yen was slightly weaker.

And the AUD/EUR fell, holding true to the previous week’s outside weekly bearish reversal.

The larger advancers over the past week comprised of;

Cocoa 2.8%, Lean Hogs 3%, Heating Oil 2.1%, Natural Gas 14.5%, Sugar 2.4%, Urea 2.1%, Gasoil 3.7%, Uranium 12.6%, Oats 4.5%, Nasdaq Composite 3.1%, Nasdaq 100 3.2%, Nikkei 225 6.5%, SOX 3%, S&P 500 1.8%, BIST 100 4.7% and the ASX 200 rose 1.5%.

The group of largest decliners from the week included;

Aluminium (1.6.%), Rotterdam Coal (6.5%), Baltic Dry Index (30.8%), WTI Crude (1.6%), Iron Ore (4.4%), Copper (1.8%), Coffee (1.6%), Lumber (1.9%), JKM in Yen (11.4%), Tin (4.3%), Newcastle Coal (2.5%), Orange Juice (4.8%), Palladium (5.7%), Platinum (5.2%), Dutch TTF Gas (7.4%), Corn (3%), Soybeans (2.6%), Wheat (3.3%), Shanghai Composite (1.6%), KBW Bank Index (3.1%), HSCEI (2.2%), KRE Regional Bank Index (2.6%), KOSPI (2.1%), Oslo (1.4%), Chile (1.4%) and the ASX Materials. Index fell 1.8%.

January 14, 2024

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending January 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.

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

KLSE – the Kuala Lumper Stock Exchange

Overbought (RSI > 70)

Cocoa

Uranium

Iron Ore

And India’s NIFTY and SENSEX equity indices

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

None

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

Rotterdam Coal

Oversold (RSI < 30)

Nickel on India’s MCX Exchange

Lithium Hydroxide

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

None

Notes & Ideas:

Government bond yields rose except for the Chinese 10’s and the Japanese durations.

Probability implied such a rise when observing the many 5-9 weeks declining streaks in existence.

While you may have not placed a trade to sell any bonds at this juncture, this publication certainly suggested that one shouldn’t buy bonds at the recent ‘extremes’.

Swiss 10’s have strung a 3 week yield rally from 0.61% to 0.83%. The were oversold 4 weeks ago.

The yield in the Aussie 10’s saw its 5 week declining streak come to end.

And the South Korean 10’s broke their 10 week losing streak.

Equities were mostly lower except for there IBEX, Oslo, Helsinki, SMI, SET & Copenhagen.

The latter has put together a 10 week winning streak, while Thailand’s SET is in its 5 consecutive rising week.

The Nasdaq Biotechnology has quietly risen for 8 straight weeks.

Asian and U.S. were amongst the larger declining indices for the week.

In fact, the DJ Industrials, the Nasdaq Composite and the S&P 500 all broke (unsurprisingly, again) their consecutive winning streaks.

As did Mexico, Stockholm & Chile’s main equity indices.

Furthermore, the AEX, CAC, DAX, KOSPI, TAIEX and the ASX 200, all performed weekly outside bearish reversals. 

And the SOX did not make a new all-time high this week, instead it fell 6%.

Commodities were mostly weaker, although the commodity indices were flat to slightly higher.

The strength in the energy contracts helped offset the larger declines seen in metals and grains.

Rotterdam Coal rose 8% erasing last week’s 8% decline.

Natural Gas rose significantly while Palladium, Oats and Soybeans tanked.

Hot Rolled Coil Steel isn’t overbought anymore nor is Platinum and Coffee.

The former broke its 11 week winning streak.

All 3 fell notably during the week.

Finally, Rice had a bullish outside reversal week which suggests a continuation of its upward trend.

Aluminium fell 5% after rising 14% over the previous 4 weeks.

Orange Juice rose breaking its 6 consecutive weeks of gains 

And Sugar’s rose, ending its declining weekly at 8 weeks.

Amongst currencies, the USD rose strongly and it isn’t oversold this week.

No currencies are in any extreme territory this week and its easiest to reference last weeks edition to see which ones appeared as so.

The GBP was strong, the Euro was mixed and the Yen was weaker.

The AUD was weaker everywhere except against the Yen.

There were big moves in FX this past week, with many moving 1% or more.

For example, the SEK fell 1.7% versus the USD while the Yen fell 2.5% against the USD.

And the AUD/EUR had an outside weekly bearish reversal.

The larger advancers over the past week comprised of;

Australian Coking Coal 1.9%, Rotterdam Coal 7.8%, China Coking Coal 1.9%, WTI Crude 3.7%, Lean Hogs 2.3%, Heating Oil 2.5%, Cattle and Lumber rose 1.3%, Natural Gas 15.1%, Orange Juice 2.5%, Sugar 2.6%, S&P GSCI 1.1%, Dutch TTF Gas 6.8%, Brent Crude 2.3%, Gasoil 2%, KLSE 2.3%, MOEX 2%, Copenhagen 1.5% and Turkiye’s BIST 100 rose 2.1%.

The group of largest decliners from the week included;

Aluminium (4.9%), Copper (2.3%), HRC (4.6%), Coffee (2.9%), Lithium (7.2%), Tin (2%), Newcastle Coal (2.5%), Nickel on MCX (1.9%), Palladium (6.5%), Platinum (3.7%), Urea Middle East (1.6%), Silver in USD (2.5%), Corn (2.2%), Oats (8.5%), Soybeans (3.2%), Wheat (1.9%), Shanghai (1.5%), CSI 300 (3%), CAC (1.6%), China A50 (2.8%), DJ Transports (2.5%), HSCEI (2.8%), Hang Seng (3%), BOVESPA (1.6%), S&P SmallCap 600 (3.6%), Russell 2000 (3.7%), Nasdaq Composite (3.3%), KOSPI (2.9%), FTSE 250 (2.4%), S&P MidCap 400 (2.4%), Mexico (2.1%), Nasdaq 100 (3.1%), Stockholm (2.5%), SOX (5.8%), Chile (2.3%), S&P 500 (1.5%), STI (1.7%), TAIEX (2.3%), ASX 200 (1.3%), ASX Materials (3%) and the ASX Small Caps fell 2.8%

January 7, 2024

by Rob Zdravevski

rob@karriasset.com.au