rob zdravevski's blog

ASX 200 – boring, sideways travel until now?

The ASX 200 equity index is not any higher than 3 months ago.

On May 25, 2023, I wrote a note forecasting ‘weakness’ in the ASX 200.

For 2 months since then, we saw general weakness.

Seeing weakness in ASX 200

In fact, todays’ price is the same price as seen in May ’23, March ’23, December ’22 and May 2022.

The past 15 months or so will surely disappoint those passive ETF indexers who can’t ‘read the tape’ or don’t believe in timing entry and exits.

But today, there are early develops in a new upward trend for the ASX 200.

September 6, 2023

by Rob Zdravevski

rob@karriasset.com.au

When the U.S. Dollar was king….

One year ago, I wrote a note when the U.S. Dollar Index (DXY) was at an overbought ‘extreme’.

The chart below reflects on that moment and those previous.

There have been 7 such times over the past 50 years.

Separately, this occurrence also has correlations to commodity prices and other assets.

The study below shows the percentages that the DXY Index was trading above its 50 month moving average whilst also registering a monthly overbought reading along and when the price was also 2.5 standard deviations above its rolling monthly mean.

And at various points in the past year or so, we still heard pundits calling for the demise of the U.S. Dollar.

September 4, 2023

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending September 1, 2023)

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)

Rubber

Overbought (RSI > 70)

U.S. 3 month bill yields

Russian 10 year bond yields 

Cocoa

MOEX

And Turkiye’s BIST 100

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

Uranium

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

None

Oversold (RSI < 30)

U.S. Mid West Hot Rolled Coil Steel

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

Lithium

Notes & Ideas:

The government bond yields which appeared in the overbought list last week are no longer there as yields fell everywhere.

Chinese 10 year bond yields were the exception, for they rose and moved out of Oversold territory.

More interestingly, the U.S. 2 year bond yield posted an outside bearish reversal week.

All Equity indices were higher this week with many of them posting gains somewhere between1.4% to 1.6%, while the lost below features the over-achievers.

Copenhagen and Chile were the only two markets to decline for the week with the latter in a 5 week losing streak.

Last week’s losers (Chinese and U.S. banks) are this amongst this week’s winners and the Shanghai Composite & Hang Seng aren’t oversold this week.

While the Nasdaq Composite has climbed 5.5% over the past fortnight.

Commodities were mixed although rising metals and oil prices tipped the scales into the positive for the broader indices.

Amongst the energy sector, we saw Crude Oil, Gas and Coal prices rise while Gasoline, Distillates and Heating Oil fell. The latter giving up all of last weeks gain.

Over the past 2 weeks, Sugar, Aluminium, Platinum have risen 9%, 7% and 6% respectively, while Wheat has fallen 7% over the same time.

LNG and Oats aren’t overbought this week although Rubber entered this region for the first time in 16 months following its 16% rise over the past 3 weeks.

Uranium and Australian Coking Coal are in 8 week winning streaks. Iron Ore’s rising streak completes its 5th week while Heating Oil broke its 9 week consecutive climb.

Inversely, Lithium Hydroxide prices are in a 9 week losing streak while Middle East Urea prices have fallen for 5 consecutive weeks.

Cocoa is overbought again amidst a stellar 60% advance since late September 2022.

And U.S. Midwest Hot Rolled Coil Steel prices fell 10% and are now Oversold.

In currencies, the AUD rose and broke various declining streaks include that against the USD.

In turn, the USD was generally higher, seeing the DXY Index extend a 7 week winning streak.

The same streak exists in the USD/DKK with the exception of the USD/CAD which broke its 5 week winning run. 

CHF/AUD which featured in recent posts isn’t overbought this week.

Overall, the EUR weakened. Specifically, the EUR/USD pair is in a 7 week losing streak now trading at 1.07. Before this move, it was 1.12.

The GBP was flat while the JPY/GBP moved out of Oversold territory.

The larger advancers over the past week comprised of;

Australian Coking Coal 6%, Aluminium 4.7%, Cocoa 4%, China Coking Coal 5.8%, WTI Crude 7.5%, Cotton 3%, Iron Ore 1.8%, Lean Hogs 4.3%, Copper 2.3%, Newcastle Coal 14.7%, Natural Gas 8.9%, Platinum 2.2%, Sugar 4%, S&P GSCI 2.4%, Rubber 3.5%, CRB Index 2.2%, Dutch TTF Gas 2.4%, Brent Crude 5.7%, Uranium 3.9%, Corn 2.3%, Rice 3.3%, Shanghai 2.3%, CSI 300 2.2%, AEX 1.7%, KBW Bank Index 2.9%, DJ Industrials 1.6%, HSCEI 2.5%, Hang Seng 2.4%, Bovespa 1.8%, MOEX 2.3%, Nasdaq Composite 3.3%, Kospi 1.8%, S&P 500 2.5%, TSX 3.6%, ASX 200 2.3%, KRE Regional Banks 4.6%, S&P SmallCap 600 3.5%, BIST 4.4%, FTSE 250 2.2%, ASX Materials 3.2%, ASX Industrials 2%, S&P MidCap 400 3.6%, Nasdaq 100 3.7%, Nikkei 225 3.4%, Oslo 2.8%, Helsinki 3.7%, Stockholm 1.8%, Russell 3.6% and the Philadelphia Semiconductor (SOX) Index soared 5.4%.

The group of decliners included;

Rotterdam Coal (4.7%), Gasohol (2.8%), Heating Oil (5.8%), Hot Rolled Coil Steel (10.6%), Lumber 2.4%, LNG in Yen (6%), Lithium (146%), Tin (3.1%), Gasoline (2%), Urea U.S. Gulf (6.2%), Urea Middle East (9.9%), Oats (2.9%) and Wheat fell 4.2%.

September 3, 2023

by Rob Zdravevski

rob@karriasset.com.au

South32 closing in on mean reversion

This chart and study of Australian domiciled metals and mining company, South32 is an example of a stock price mean reverting back to its 200 week moving average.

This price action is mimicked across many commodity related stocks.

For now, I’ll wait for South32 (S32:ASX) to trade down to $2.95.

August 30, 2023

by Rob Zdravevski

rob@karriasset.com.au

Re-acquainting with the Copper/Gold Ratio

‘No one’ is ‘long’ bonds.

‘No one’ thinks bond yields will fall.

The divergence (and expected catch-up) between the Copper/Gold Ratio and U.S. 2’s and 10’s (as shown in the charts below) aids my thinking that bond yields will decline or at least converge toward their longer term means which are sitting much lower than the current ‘price’.

Once upon a time, not so long ago, I recall investors (in various meetings) telling that me “they would take 5% any day of the week”.

Today, the consensus isn’t content and wants to squeeze interest rates higher.

I’d guess that should interest rates fall notably, there is a move in consumer behaviour, asset pricing and business that many aren’t fathoming.

August 29, 2023

by Rob Zdravevski

rob@karriasset.com.au

Queuing off the AUD/USD

I’m watching the AUD/USD closely.

My previous notes have said it should hold 0.63-0.64 region and for now that remains valid……until it doesn’t.

Buying the Aussie weakness is one my larger macro trade ideas (even versus EUR and GBP)

I don’t subscribe to calls for it to trade below 0.6000 although my view could change.

The case for 0.63-0.64 support holding is because the weekly downtrend is lacking strength.

Here are some charts showing the dance between the AUD/USD and i) Australian Inflation, ii) Iron Ore prices and iii) the S&P Goldman Sachs Commodity Index.

August 29, 2023

by Rob Zdravevski

rob@karriasset.com.au

Macro Extremes (week ending August 25, 2023)

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)

German, Swedish, French and Chilean 10 year government bond yields

TBT

LNG

U.S. 20 and 30 year government bond yields

Overbought (RSI > 70)

U.S. 3 month bill yields

Uranium

Oats

CHF/AUD

GBP/JPY

MOEX

And Turkiye’s BIST 100

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)

TLT

Shanghai Composite

Hang Seng

and Stockholm 30 equity index

Oversold (RSI < 30)

Lithium

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

Chinese 10 year government bond yields

Notes & Ideas:

Equities had a mixed week with an overall higher bias.

Thailand’s SET rose 2.7% with he naming of a new Prime Minister.  

The Dow Jones Transports is in a 4 week losing streak as is the KRE Regional Bank Index. The latter having fallen 10% over that time.

While the larger news was that the Nasdaq et al. registered a winning week breaking its 3 week downturn.

The losers appearing on this weeks list are Chinese equities and American banks.

In between, many indices stayed within 1% of the unchanged mark.

For some comparison, the S&P 500 rose 0.8%, the MidCaps fell 0.1%, the Russell 2000  eased 0.3%, the Small Caps declined 0.4%, the U.S. Small Caps Value fell 1.2%, the ASX 200 declined 0.5% while the ASX Smalls Caps squeezed 0.1% higher.

Across the Commodities complex, prices were generally higher,

Sugar had a bullish outside reversal week.

Heating Oil has strung together 9 consecutive winning weeks, advancing 36% over that time.

Agricultural’s were mixed, although Oats soared 9% and into overbought territory.

The Baltic Dry Index gave all of last week’s gains.

And Silver broke its 5 week losing streak by rising 6%.

In currencies, the AUD firmed which was enough to move it out last week’s reported oversold territory.

Albeit by a slight margin, the AUD did extend its weekly losing streak against the USD, the SGD and the Indian Rupee to 6.

Many other currencies are also streaking.

The CAD/USD, the NZD/USD and the EUR/USD are in 6 week losing streaks. The latter appeared in this publication during July 10-17 editions as being overbought, which was the first time the Euro was so since July 2020.

A year earlier, the EUR/USD was trading at 0.9700 and the financial media was hyperventilating about it breaking parity. Funny how things turn when you watch the ‘tape’ rather than absorb noise. 

The USD/DKK and USD/SEK are in the 6 week winning streaks. The opposite applies to the reciprocal currency.

The CHF/AUD broke its 9 week consecutive rising run.

The U.S. Dollar (DXY) has now risen for 6 straight weeks.

And the GBP was weaker. It’s not overbought versus the AUD and it produced a bearish outside reversal week vs the USD and the JPY.

Bond yields fell and intra-week many did not trade higher than the previous weeks high.

I say that bond yield fell…well all but for the U.S. shorter dated 2’s, 5’s and 7’s.

And Chinese 10 year yields are at their lowest close since April 2020.

The larger advancers over the past week comprised of;

Aluminium 1.7%, Rotterdam Coal 5%, Cotton 4.4%, Gasohol 2.9%, Heating Oil 4.6%, Coffee 2.1%, Tin 4.6%, Platinum 3.6%, Gasoline 1.7%, Sugar 4.5%, Silver 6.6%, Silver in AUD 6.5%, Oats 8.7%, Soybean 2.6%, Nasdaq Composite 2.3%, Nasdaq 100 1.7%, SET Index 2.7% and the BIST 100 rose 2.7%.

The group of decliners included;

Baltic Dry Index (12.7%), Hogs (2.7%), Lumber (3.5%), LNG in Yen (7.1%), Orange Juice (2.9%), Palladium (2.5%), Dutch TTF Gas (4.5%), Corn (1.8%), Wheat (2.7%), JKM (3.5%), Shanghai (2.2%), CSI 300 (2%), KBW Bank Index (2.1%) and the KRE Regional Bank Index fell 2.5%.

August 27, 2023

by Rob Zdravevski

rob@karriasset.com.au