Macro Extremes (week ending February 9, 2024)

February 11, 2024 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) 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

Cotton

Gasoil

NZD/AUD

Overbought (RSI > 70)

Uranium

Rice

Robusta Coffee

AEX

Italy’s MIB

Nikkei 225

Dow Jones Industrial Average

Nasdaq 100

Nasdaq Composite

Nasdaq Transportation Index

Egypt 30 Index

Philadelphia Semiconductor Index (SOX)

And the S&P 500 Index

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

Cocoa

Russia’s MOEX Index

Turkiye’s BIST 100 Index

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

Shanghai Composite

Oslo’s OBX Index

Oversold (RSI < 30)

Chile 2 year government bond yield

JKM LNG

Lithium Hydroxide

Nickel on India’s MCX Exchange

Corn 

Soybean

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

China 10 year government bond yield

Notes & Ideas:

Government bond yields were higher for week.

Many of them are on the move higher back towards the middle of their recent ranges.

German 10’s closed at their highest weekly close since November 30, 2023.

Equities were stronger, however there were some losers too.

The Dow Jones Industrial Average has put together a 5 week winning streak and has spent the past 9 weeks in overbought territory.

The S&P 500 is also in a 5 week winning streak and has risen for 14 of its past 15 weeks.

Amsterdam’s AEX made a new all-time high.

The Nasdaq Composite are yet to reach a new all-time high but it did close at its highest weekly close while stretching a 5 week winning streak.

The Nasdaq Transportation Index made an all-time high and weekly close. It has risen 10% in the past 4 weeks.

The Russell 2000 and the S&P MidCap 400 both performed a bullish outside reversal week.

And Turkiye’s BIST has risen for 5 consecutive weeks making for a 19% (in TRY terms) return.

Commodities were generally stronger with the notable advancers and decliners listed below. 

The big news was that Lithium Hydroxide prices were unchanged for the week.

Does being ‘unchanged” qualify to end its 13 week consecutive losing streak?

Lean Hogs aren’t overbought but Cotton and Gasoil (Diesel) is.

Cattle is in a 6 week winning streak and has closed higher in 8 of the past 9 weeks. Furthermore, Cattle is trading at extended percentages (41%) above its 200 week moving average.

Heating Oil continues its roller coaster. This week it rose 10%, last week it fell 6% and the week before that saw it rise 7%. Mamma Mia !

Sugar is in a 6 week winning streak.

Soybeans and Corn are registering oversold extremes. 

Soybeans are in a 8 week losing streak and have fallen 12 of the past 13 weeks.

It’s worth to note that Henry Hub Natural Gas prices are a whisker away from making new all-time lows while JKM LNG are trading at their lowest close since December 20, 2020.

And Lithium Hydroxide has now spent 32 consecutive weeks in weekly oversold territory.

Amongst currencies, the collective U.S. Dollar (DXY) Index is in a 4 week winning streak.

While against specific pairs, the U.S. Dollar has risen for the past 5 or 6 weeks.

The AUD has slight gains, thus putting an end to its consecutive losing streaks against many pairs such as the 6 week losing streak for the AUD/SGD.

The Yen was weaker.

And the GBP/USD is in a 4 week losing streak.

The larger advancers over the past week comprised of;

Baltic Dry Index 9.8%, Cocoa 11.8%, WTI Crude Oil 5.8%, Cotton 5.4%, Heating Oil 10.3%, Cattle 2.3%, Newcastle Coal 4.8%, Gasoline 8.9%, S&P GSCI 3.5%, CRB Index 2.5%, Brent Crude Oil 5.8%, Gasoil 12.9%, Rice 2.6%, Robusta Coffee 3.2%, Shanghai Composite 5%, CSI 300 5.8%, AEX 3.6%, China A50 5.3%, DJ Transports 2.6%, HSCEI 1.7%, Russell 2000 2.5%, Nasdaq Composite 2.3%, S&P MidCap 400 1.6%, Nasdaq 100 1.8%, Nikkei 225 2%, Copenhagen 1.6%, SOX 5.3%, Nasdaq Transports 2.8%, BIST 4.4% and the S&P 500 rose 1.4%

The group of largest decliners from the week included;

Rotterdam Coal (2.8%), Lean Hogs (2.2%), Copper (3.5%), Hot Rolled Coil Steel (2.9%), Natural Gas (11.2%), Nickel (2.1%), Orange Juice (2.1%), Palladium (8.4%), Platinum (2.6%), Dutch TTF Gas (7.5%), Uranium (4.1%), Corn (3.1%), Austria (2.4%), IBEX (1.7%), Oslo (2.5%), Helsinki (2%), SMI (1.3%), ASX Materials (3%) and the ASX 200 Index fell 0.7%.

February 11, 2024

by Rob Zdravevski

rob@karriasset.com.au

Filed under Finance & Investment Tagged with , , , ,

Macro Extremes (week ending February 2, 2024)

February 4, 2024 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) 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

Lean Hogs

Overbought (RSI > 70)

SHY 

Cocoa

Rubber

Uranium

AEX

Dow Jones Industrial Average

Nasdaq 100

Nasdaq Composite

NIFTY

And the S&P 500 Index

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

KLSE – the Kuala Lumper Stock Exchange

Turkiye’s BIST 100 Index

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

None

Oversold (RSI < 30)

Chile 2 year government bond yield

JKM LNG

Lithium Hydroxide

Nickel on India’s MCX Exchange

Corn 

Soybean

CSI 300 

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

China 10 year government bond yield

Shanghai Composite Index

Notes & Ideas:

Government bond yields were mostly lower for the week, again, even with jump in yields seen in Friday’s session.

The British 2’s, 3’s and 5’s were the exception, wth rising yields for the 2nd consecutive week).

The Japanese 2’s rose in stunning fashion. They have climbed from 0.00% to 0.10% over the past 3 weeks.

Equities were mixed, with a slight weaker bias, although many more are appearing in the overbought column.

Indonesia rose 3.5% reclaiming all of last week’s decline.

The Dow Jones Industrial Average has pout together a 4 week winning streak and has spent the past 8 weeks in overbought territory.

The S&P 500 is also in a 4 week winning streak and has risen for 13 of its past 14 weeks.

The Shanghai Composite has now registered an oversold quinella.

Amsterdam’s AEX and the Nasdaq Composite are yet to reach a new all-time high but the former did close at its highest weekly close.

The Nasdaq Transportation Index finished at its highest weekly close but yet it to break its previous all-time high. It has risen 7% in the past 3 weeks.

And Turkiye’s BIST has risen for 5 consecutive weeks making for 15% (in TRY terms) return.

Commodities were weaker with energy contracts.

To accompany that weakness in energy, WTI Crude, Brent Crude and Gasoline prices posted bearish outside reversal weeks.

Cattle is in a 5 week winning streak and has gained in 7 of the past 8 weeks. Furthermore, Cattle is still trading at extended percentages (39%) above its 200 week moving average.

Newcastle Coal broke its 7 week losing streak.

Heating Oil fell 5.5% giving up most of last week’s 6.8% rise.

Sugar is in a 5 week winning streak.

Soybeans and Corn are registering oversold extremes. 

Soybeans are in a 7 week losing streak and have fallen 11 of the past 12 weeks.

JKM LNG is at its lowest close since December 20, 2020.

And Lithium Hydroxide has now spent 31 consecutive weeks in weekly oversold territory.

Amongst currencies, the AUD has seen its 5th and 6th 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

The U.S. Dollar has risen for the past 5 weeks against most pairs.

The Yen was also firmer.

The AUD/CAD, AUD/USD and AUD/INR have declined for 5 consecutive weeks. The CAD/USD has done the same.

The AUD/GBP and the AUD/SGD has fallen for 6 weeks in a row.

The EUR/GBP has eased lower for its 6th straight week.

The larger advancers over the past week comprised of;

Rotterdam Coal 5%, Cocoa 7.2%, Cotton 3.3%, JKM LNG 1.8%, Newcastle Coal 2.4%, Orange Juice 20.3%, Dutch TTF Gas 4%, Uranium 6%, Gold AUD 2.1%, Oats 2.2%, Rice 2.5%, DJ Industrials 1.4%, Indonesia 3.5%, KOSPI 5.5%, Mexico 2.4%, NIFTY 2.4%, Sensex 2%, Nasdaq Transports 2.3%, BIST 100 3.8%, ASX 200 1.9% and the ASX Small Caps rose 2.5%.

For some reference, the Nasdaq Composite and the S&P 500 rose 1.1% and 1.4% respectively.

The group of largest decliners from the week included;

Australian Coking Coal (5%), Bloomberg Commodity Index (2.1%), Baltic Dry Index (7.3%), China Coking Coal (5%), WTI Crude (7.4%), Iron Ore (5.4%), Heating Oil (5.5%), Lumber (3.4%), Lithium (12.4%), Natural Gas (4.4%), Nickel (3.4%), Platinum (2.1%), Gasoline (7.7%), S&P GSCI (3.8%), Brent Crude (6.9%), Gasoil (2.6%), Soybean (1.7%), Shanghai (6.2%), CSI 300 (4.6%), KBW Banking Index (1.7%), China A50 (4.4%), HSCEI (2.6%), Hang Seng (2.6%), KRE Regional Bank Index (7.2%), Oslo (1.7%), Helsinki (2.3%), S&P SmallCap Value (2%) and Switzerland’s fell 1.3%.

For some reference, the S&P Small Cap 600 fell 1.2%, the Russell 2000 declined 1%, the SOX closed 0.1% lower and Toronto’s TSX eased 0.2% for the week.

February 4, 2024

by Rob Zdravevski

rob@karriasset.com.au

Filed under Finance & Investment Tagged with , , , ,

Macro Extremes (week ending January 19, 2024)

January 21, 2024 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) 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

Uranium

Dow Jones Industrial Average

Nasdaq 100

Philadelphia’s Semiconductor Index

And India’s NIFTY equity index

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)

USD/INR

Hang Seng China Enterprises Index (HSCEI)

Hang Seng (HSI)

Oversold (RSI < 30)

China 10 year government bond yields

Nickel on India’s MCX Exchange

Nickel on LME

Lithium Hydroxide

JKM LNG

CSI 300

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

Soybeans

Corn

Shanghai Composite equity index

Notes & Ideas:

Government bond yields rose for the week, in back and forth weekly action over the past month, although yields are painting a picture of either consolidating the decline in yields seen since October 2023 or recovering part of the fade.

They have all bounced from their oversold extremes seen 4-6 weeks ago.

The only bond market to see yields fall was China’s 10 year paper.

Equities saw a 2-speed environment.

Most global equity indices saw weakness while the ‘larger’ U.S. indices continued their rise.

For example, the Nasdaq has risen 5.5% over the past 2 weeks, although it did fall 3.1% in the week prior to the most immediate fortnight. 

The smaller U.S indices didn’t see the aforementioned strength. The banking and small cap indices were flat while the Russell 2000 was down 0.4% and the MidCaps were up 0.4%.

However, some indices are now trading at stretched levels above their 200 week moving average.

The SOX (closed at its all-time high) is 46% above it, while the Nasdaq 100, the Nikkei 225 and the Nasdaq Composite are 31%, 29.5% and 21% respectively above that measure.

Incidentally, the S&P 500 is trading at 20% above its 200 week moving average and we may start to see money shifting and broadening to the Small and Mid Caps, the further that percentage spread rises.

Taiwan’s TAEIX rose 1% following an election return of the incumbent political party.

On the other side of the ledger, most European markets fell, lead by the Nordics but also including the 1% declines in the DAX and the CAC.

This week saw the Hang Seng and the HSCEI close at their lowest levels since October 24, 2022, while some mainland China markets were mute.

The CSI 300 fell 0.4% while the China A50 rose 0.6%.

India’s SENSEX fell 1.2% and isn’t overbought this week.

Copenhagen snaps its 10 week winning streak and the Nasdaq Biotechnology Index has broken its run of 9 consecutive weekly gains.

The Dow Jones Index had a bullish outside reversal week while Indonesia (snapping its 5 week winning streak) and India’s NIFTY performed outside bearish reversals.

Chile’s main index has fallen 5.3% over the past 3 weeks, yet still remains 21% above its 200 week moving average suggesting a reasonable probability that mean reversion (convergence) lays ahead.

The ASX Materials Index has sunk 9% in the past fortnight and the Hang Seng China Enterprises Index (HSCEI) has tanked 11.5% over the same time. The latter now appears in this week’s oversold category.

And Brazil’s BOVESPA has declined 5% over the past 3 weeks. 4 weeks ago, it was overbought.

Commodities were mixed.

The notable movers either side of the ledger broadly offset the week ending results for the various commodity indices.

Large advances were seen in Sugar, Cocoa & Cotton which saw advances compound to 11.5%, 9%, 4.5% respectively over the past fortnight.

For trend followers, Heating Oil is giving good bullish signals, while Palladium has sunk 25% over the past 4 weeks.

Natural Gas broke its 4 week winning streak as it collapsed 24% over the past week in wicked price action. It rose 30% in the prior 2 weeks.

Other gas contracts such as Dutch TTF and JKM LNG also saw weakness.

Gold (as priced in Australian Dollars) is in a 5 week winning streak.

Soybeans and Corn are registering oversold extremes. 

Soybeans are in a 5 week losing streak and have fallen 9 of the past 10 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 (35%) above its 200 week moving average.

And Lithium Hydroxide has now spent 29 consecutive weeks in weekly oversold territory.

Amongst currencies, the AUD has seen its 4th consecutive week of declines against many pairs (except against the Yen), which sits proportionally within my published note on December 29, 2023 that the AUD was ‘full’.

Now, AUD/USD is full

The U.S. Dollar has risen for the past 3 weeks against most pairs.

The only currency pair trading at an extreme this week is the overbought Indian Rupee versus the U.S. Dollar. Although this occurrence shouldn’t be taken at face value for there are some nuances about it. 

I see a dichotomy in the direction of the rising CHF/AUD and the ‘risk-on’ sentiment or more particularly, the strengthening Nasdaq.

This requires more work and some rationalising because the weaker Yen is emphasising ‘risk-on’ in equities.

The Euro was mixed.

The British Pound was firmer.

And the SEK/USD has fallen for 4 consecutive weeks resulting in a tumble of 5%.

This January 7th, 2024 note mentioned something about that.

The Swedish Krona and Stockholm’s stockmarket

The larger advancers over the past week comprised of;

Baltic Dry Index 3%, Cocoa 6%, Cotton 3.3%, Cattle 1.8%, Tin 3.6%, Gasoline 1.9%, Sugar 9.1%, Urea Middle East 2.3%, Uranium 1.9%, Oats 3%, Nasdaq Composite 2.3%, Nasdaq 100 2.3% and the Philadelphia Semiconductor (SOX) Index soared 8%.

The group of largest decliners from the week included;

Aluminium (1.9%), Rotterdam Coal (2.6%), Bloomberg Commodity Index (1.2%), JKM LNG (10.1%), Lumber (1.9%), JKM LNG in Yen (4.7%), Newcastle Coal (4.8%), Natural Gas (24%), Nickel (1.6%), Palladium (3.1%), Silver (2.5%), Dutch TTF Gas (11%), Shanghai Composite (1.7%), HSCEI (6.5%), HSI (5.8%), IBEX (2.3%), BOVESPA (2.6%), KOSPI (2.1%), FTSE 250 (1.7%), Nasdaq Biotech’s (1.7%), Oslo (1.6%), Copenhagen (3.1%), Helsinki (3.8%), Stockholm (2.5%), SET (2.2%), Chile (2.1%), FTSE (2.1%), ASX Materials (3.7%), ASX Industrials (1.6%), Austria’s ATX (1.6%) and the Developed All World Index ex USA fell 2.1%. 

January 21, 2024

by Rob Zdravevski

rob@karriasset.com.au

Filed under Finance & Investment Tagged with , , , ,

Reviewing last quarter’s Macro Extremes moments

January 20, 2024 Leave a comment

Each Sunday I publish a note titled ‘Macro Extremes’ which observes and notes prices of various assets or markets trading at the extended part of their ‘pendulum’ for the week that just ended.

Here is a review of some selected price action of those appearing in the publication over the past couple months.

On December 19, 2023, the British 10 year bond yields were at their lowest since May 2023. They have since moved from 3.50% to 3.92%.

The October 22, 2023 edition saw Mexico’s IPC equity index register a ‘quinella’ of oversold readings when it was at 47,800 points. By December 20th, it rallied (21%) to 58,000 points when it reached an overbought quinella.

That same edition mentioned the extreme oversold of the Nasdaq Biotech Index when it was trading around the 3,650 point mark. 3 weeks ago, its was overbought when it hit 4,430 points, which is a stupendous 21% run within 9 weeks.

A week later, the ASX Industrials Index triggered its own oversold quinella at 6,150 points. it soon lifted (12%) to 6,900 points by New Years Day.

And the October 6, 2023 edition warned to not chase the overbought Orange Juice price which was then trading at $3.90. Its current price is $3.08.

The next edition of Macro Extremes is published tomorrow.

January 20, 2024

by Rob Zdravevski

rob@karriasset.com.au

Filed under Finance & Investment Tagged with , , , ,

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