Trying to hear what's not being said
January 26, 2023 Leave a comment
U.S. Gulf Urea prices are exhibiting Oversold ‘extremes’.
Backwardation (in forward months contracts) makes for a bullish case too.
The Middle East Urea prices are nearly Oversold too.
Natural Gas (Henry Hub) are approaching Oversold as is the price of Wheat (see correlation)
January 26, 2023
by Rob Zdravevski
rob@karriasset.com.au
January 26, 2023 Leave a comment
Only about 30 cents to go and Natural Gas reaches my $2.50 target.
But 30 cents doesn’t matter considering my original Short call on Natural Gas from its lofty $10 mark seen several months ago.
You can read the time series of this view in all of the links below, including some that discuss correlations to Australian inflation.
The focus now is to consider a Long position in Natural Gas…..or a 2nd or 3rd derivative of that idea.
January 26, 2023
by Rob Zdravevski
rob@karriasset.com.au
January 22, 2023 Leave a comment
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) 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)
Copper
Copper/Gold Ratio
Overbought (RSI > 70)
German 2 year government bond yields
Gold (in Canadian Dollars)
Gold (in U.S. Dollars)
Cattle
Istanbul’s BIST Index
SGD/USD
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)
None
Oversold (RSI < 30)
U.S. 5 year yield minus U.S. 3 month bill yield spread
Urea (U.S. Gulf)
Urea (Middle East
The Oversold Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)
None
Notes & Ideas:
Global Equities mostly had a benign week with Chinese stocks continuing to steadily add to their gains.
Now, we are hearing bullish cries from many firms but in the near-term, it’s too late. Chinese equity indices have risen 18.5% over the past two and half months and nearing towards an ‘extreme’. Such a return is also a reminder to calibrate ones expectations.
In commodities….over the past 2 weeks, energy prices (except for Natural Gas) have rebounded. This is understandable considering their recent declines.
Gasoil, Brent Crude and WTI Crude have risen 11%, Heating Oil is up 15% and Gasoline has bounced 17%.
6 week ago, Gasoline completed its mean reversion (down to its 200 week moving average), more than halving from its peak of $4.30 to a low of $2.02.
Dutch TTF Gas and Urea have nearly mean reverted. Cotton, Coffee and Natural Gas already have done so.
The latter has slumped a stunning 72% from its high and has just completed its 6th consecutive ‘down’ week’. Bounces are expected when weekly streaks reach 6, 7 or 8. It’s rarefied air.
And Palladium closed at its lowest level since December 20, 2021.
Bonds were the biggest newsmaker for the week as they continued their rally. Buyers remained the more aggressive and yields generally fell across the world.
Whilst they have made a reasonable swoon towards their long term means and arguments for such gravitational pull has validity, in the interim bond yields are nearing some Oversold ‘extremes’.
Incidentally, the U.S. 5 year inflation breakeven rate has nearly mean reverted, which I find understandable considering the same has bee occurring in many commodity prices.
There was much palaver made about the Bank of Japan losing their marbles and control of the Japanese 10 year Government Bond (JGB) yield…….but the ‘widow-maker’ soon returned posting a bearish outside reversal week and yield fell from 0.53% to 0.37%.
Other price action news saw outside bearish reversal weeks in USD priced Silver, AUD/GBP and AUD/EUR, while the AUD/JPY and the Nikkei 225 made the opposite.
The KBW Banking Index can be thankful for Friday’s 3.1% surge to allow it to finish the week only down 0.5%.
The AUD/CAD is nearing an Overbought extreme.
The Baltic Dry Index has now tanked 62% in the past 3 weeks.
The Indian Rupee (vs., USD) isn’t Oversold anymore and building a base near its multi-year lows.
And while I watch for more mean reversions to complete, it’s folly to ‘paint shapes’ resembling a “V” or a “W” assuming prices sharply recover up to where they recently came from.
The larger advancers over the past week comprised of;
Australian Coking Coal 3.3%, Rotterdam Coal 3.2%, WTI Crude 2.2%, Gasoil 5.4%, Heating Oil 6.5%, JKM LNG 13.1%, Coffee 2%, Tin 6.3%, Gasoline 4.5%, Cotton 5.4%, Dutch TTF Gas 3.2%, Brent Crude 2.6%, Oats 1.9%, S&P GSCI 1.7%, Shanghai 2.2%, CSI 300 2.6%, Turkey’s Istanbul BIST Index 10.7% and Australia’s ASX 200 rose 1.7% while the ASX Small Cap Index improved 0.6%.
The group of decliners included;
Baltic Dry Index (19.3%), Cocoa (3.1%), Natural Gas (7.2%), Palladium (3.6%), Platinum (2.3%), Urea Middle East (5.2%), Uranium (2.5%), DJ Industrials (2.7%), S&P 500 (0.7%) while the FSTE 100, Russell 2000 and the S&P MidCap 400 all fell 1%.
January 22, 2023
by Rob Zdravevski
rob@karriasset.com.au
January 20, 2023 Leave a comment
On August 8, 2022, my writings about a low in the Copper price hinted at how investors could take participate in that view.
One stock that I favoured for various reasons (including being a beneficiary of a low Chilean peso) was to accumulate the equity of the Chilean copper mining company, Antofagasta.
The listed London securities touched GBP 10.00 in the weeks preceding the publishing of that note, which was when clients received the buy advice. Below GBP 11.00 remained fertile ground to acquire the shares.
But there are times when I sell.
Beyond the subjective observation of the price action resembling a parabola coupled with a 63%+ advance within 6 months……….
Last week, Antofagasta simultaneously registered to a weekly Overbought reading, traded up to 2.5 standard deviations above its rolling weekly mean and its price was greater than 50% above its 200 Week Moving Average.
This moment was triggered at any price above GBP 18.00
Then I take a look at correlation between Antofagasta’s stock price and that of Copper. This is shown in the next chart.
This should prompt readers to ponder the correlation, effect and representation the price of Copper has with Equities, Oil, GDP and Interest Rates.
Indeed, there are times when to sell.
January 20, 2023
by Rob Zdravevski
rob@karriasset.com.au
January 19, 2023 Leave a comment
My July 25, 2022 note alerted readers that Silver, as priced in Australian Dollars, was triggering a weekly Oversold signal.
That day, was the low.
Silver was bought at A$26.93. The secondary buying level of $25.40 wasn’t touched.
Today, Silver in AUD is trading at A$33.92
I’d say that a 26% advance for a precious metal within 6 months is quite an adequate return.
(incidentally, AUD Gold rose 12% over the same time)
Whilst it’s still in a bullish trend, I think it is nearing the end of this advance.
I wouldn’t be initiating a new ‘long’, instead I’m in the mode to sell.
I’m seeing Silver becoming tired and a ceiling around the A$38.00 mark.
I may not wait for $38.
If AUD Silver can’t break $37.08, then probability when coupled with current, near term resistance lines suggests that a new extended, upward leg in AUD priced Silver is low or a marginal (and dangerous) bet for those initiating ’new longs’ from here.
January 19, 2023
by Rob Zdravevski
rob@karriasset.com.au
January 19, 2023 Leave a comment
What I am seeing in many markets and securities is akin to the attached chart of the S&P MidCap 400 Index.
Trend lines have been held or broken, some recent lows were higher than the previous lows…..
but I’m watching whether ‘higher highs’ are made and breach their recent peaks and not so much their all-time highs.
For the S&P MidCap 400, that ‘recent’ high that needs to be broken lies at 2,646.
Until any such break, it remains a range bound trading market where trends are unconvincing and weak.
Incidentally, today’s ‘daily’ price action (unlike the weekly chart shown below) saw many indices and stocks perform a bearish outside reversal day.
It is worth noting albeit one day doesn’t make a trend.
January 19, 2023
by Rob Zdravevski
rob@karriasset.com.au
January 17, 2023 Leave a comment
Nearly a year ago, I called a 50% decline in the price of Coffee (Arabica Beans)
While that view was formed and based on a few factors, in that note, I shared a chart denoting the ‘extreme’ percentages that Coffee was trading above its 200 week moving average.
Back then, early February 2022, Coffee was trading at $2.60.
To be particular, my call was for the price of Coffee to trade back down to it 200 week moving average.
Today, it is trading at $1.52 which is right on its 200 week moving average.
Then 2 months ago, I provided an update about this trade
That original note was designed to suggest that the price of Coffee had no business being up in that stratosphere, while it also hinted and translates into some other points;
a) buyers/importers of coffee should consider taking a chance and not locking in future delivery at those high prices,
b) it was a terrific time for coffee farmers to sell their wares,
c) companies such as Nestle and Starbucks would have experienced some margin compression,
d) speculators should be selling and,
e) other speculators may consider ‘shorting’ Coffee.
Today, these messages can start to be reversed.
And now….
So mean reversion is complete, however my work suggests reasonable enough probability of lower prices ahead, putting my more heavier accumulation somewhere between $1.10 – $1.23.
Incidentally, the recent intra-day low seen was $1.42.
Albeit my strategy is to nibble at the position (with a lower percentage allocation) at current prices, I will wait for my signals and lower prices, before increasing the size of the allocation.
January 17, 2023
by Rob Zdravevski
rob@karriasset.com.au
January 16, 2023 Leave a comment
The study below shows that WTI Crude Oil makes a notable low approximately 6 weeks after the AUD/JPY first enters weekly oversold territory.
I’d say that 3 occurrences of a weekly Oversold AUD/JPY in 22 years is considered ‘notable’.
This could be my ultimate illustration definition of ‘waiting for your pitch’.
Should this study hold true, at this stage, the AUD/JPY is yet to enter Oversold territory and so the Oil price is not at a ‘monumental’ low.
January 16, 2023
by Rob Zdravevski
rob@karriasset.com.au
January 15, 2023 Leave a comment
not in their own right nor when compared to equities.
In the chart below, the notations (and accompanying ellipses) denote the moment and percentage amount that the CRB Index is trading below its 200 week moving average
Commodities are cheap (more so versus equities) when the CRB Index trades below its 200 week moving average and registers a weekly Oversold reading.
It also signalled a reasonable time to strategically increase your allocation to equities.
There have been only 7 notable blocks when this has happened over the past 30 years.
Today, commodities aren’t cheap compared to equities and I’m not getting any convincing signal to pile into equities.
In both asset classes, I am just trading between the cycle, while maintaining a higher than normal cash allocation.
January 15, 2023
by Rob Zdravevski
rob@karriasset.com.au
January 15, 2023 Leave a comment
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) 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)
Copper
CNH/USD
Overbought (RSI > 70)
German 2 year government bond yields
Gold (in Canadian Dollars)
Cattle
Istanbul’s BIST Index
SGD/USD
The Overbought Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)
Japanese 10 year bond yield
Extremes “below” the Mean (at least 2.5 standard deviations)
Turkish 10 year government bond yields
Oversold (RSI < 30)
U.S. 5 year yield minus U.S. 3 month bill yield spread
Chile 10 year bond yield
Urea (U.S. Gulf)
The Oversold Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)
None
Notes & Ideas:
This week’s biggest news was the continuing rally in equities in Europe.
Over the past 2 weeks, the AEX and the DAX are both up 8.3%.
Other parts of the world rallied, breaking multi-week losing streaks.
And the 1.9% weekly advance in the U.K.’s FTSE 100 saw it close at an all-time high.
Who would’ve thought!
while Australia’s ASX Small Caps index has risen 6% in the past 2 weeks.
Bond yields fell once again.
We are seeing the simultaneous buying of bonds and equities.
For example, since October 17th, 2022, (when many bonds were hitting ‘weekly’ Oversold Extremes and equities were not) the IEI bond ETF has risen from a price of $112.30 to $117.13, which is an advance of 4.3%.
The IEF bond ETF has risen 7% over the same time frame…..the S&P 500 has climbed 6.6% since that same date.
Inversely, Canadian 10’s are now 2.90% and no longer 3.75%. U.S. 10’s are 3.51% and not 4.33%.
A host of commodity prices rose this week with the recently depressed Aluminium and Lumber posting the largest gains.
Copper made a new visit to an Overbought criteria.
While most of the energy complex rallied, I’m not convinced in a change of trend as Crude, Gasoil and Heating Oil had ‘inside week’s’.
In the negative category were the various Gas contracts with the Japan Korea LNG Marker (JKM) and Dutch TTF Gas prices closing at their lowest levels in 15 months.
JKM is now $20 as opposed to its $68 only 5 months ago
And Dutch TTF Gas is $65 and no longer the $320 we saw in August 2022.
Furthermore, Henry Hub Natural Gas has tanked 64% in the past 5 weeks, Rotterdam delivered Coal has slumped 42% in 6 weeks, Coffee has declined 11% in only 3 weeks and Nickel has fallen 11% in the past 2 weeks.
On a jolly note, Orange Juice and Cattle are flirting with all-time highs.
I’m talking about prices higher than the pre-Billy Ray Valentine years.
The larger advancers over the past week comprised of;
Aluminium 13.9%, Bloomberg Commodity Index 3.2%, Cocoa 1.8%, China Coal 5.1%, WTI Crude Copper 7.8%, Heating Oil 8.4%, Lumber 17.2%, Tin 6.5%, Gasoline 12.8%, Sugar 4.1%, CRB Index 4.2%, Brent Crude 8.8%, Uranium 2.1%, Silver 1.8%, Gold 2.9%, Gold in CAD 2.5%, Corn 3.2%, Oats 5.7%, Rice 2.2%, Soybeans 2.4%, S&P GSCI 5.7%, CSI 300 2.4%, AEX 3.3% KBW Banking Index 2.2%, CAXC 2.4%, DAX 3.3%, DJ Industrials 2%, DJ Transports 3.5%, MIB 2.4%, Nasdaq 100 4.5%, Stockholm 3.7%, Russell 2000 5.4%, S&P SmallCall 600 4.4%, SOX 6.2%, S&P 500 2.7%, TAEIX 3.1%, TSX 2.8%, FTSE 100 1.9%, Australia’s ASX 200 rose 3.1% while the Small Cap Index rallied 2.8%.
The group of decliners included;
Aluminium (5.2%), Rotterdam Coal (1.9%), Baltic Dry Index (16.3%), Lean Hogs (2%), JKM LNG (29.1%), Coffee (4.2%), Natural Gas (7.8%), Nickel (8.3%), Platinum (2.9%), Cotton (4%), Dutch TTF Gas (6.8%), Urea U.S. Gulf (2.9%) and Turkey’s Istanbul BIST Index fell 8.6%.
While I try to include commentary about cumulative and consecutive weekly performances such as the Baltic Dry Index falling 42% over the past 2 weeks or the AUD/GBP continued rally from its bullish outside reversal week (a few weeks back), I recommend that readers reference the preceding weekly editions to help track the continuity of previously mentioned prompts.
January 15, 2023
by Rob Zdravevski
rob@karriasset.com.au
rob zdravevski's blog 